UK - Britain's decision to base the Pensions Protection Fund on the US Pension Benefit Guaranty Corporation makes no sense, according to White House advisers.
US aides voiced their concerns in meetings organised by right-wing think-tank The Heritage Foundation in a bid to re-establish cross-Atlantic links on pensions reform.
Watson Wyatt senior consultant David Harris – who attended the talks with Australian Labour senator Nick Sherry – said: “The PBGC has run now for 30 years and it has been far from a success story.”
One White House aide asked: “Why does the UK want to adopt a broken wheel?”
The ailing $34bn (£18.7bn) US insurance fund – set up for workers who lost their pensions through company insolvency – is underfunded by $11.2bn.
The Federal Insurance Agency – established in 1974 – is funded via flat-rate premiums by firms with defined benefit pension schemes, the bond asset mix of which is set to drop from 37% to between 15-25%. The remainder will remain in a mixture of equity classes.
Sherry – who is credited with the compulsion reforms in Australia – said Australia never considered a PBGC model based on the associated cost to the employer and the limited benefit it offered. He said: “I am surprised the UK has gone down this path.”
White House aides said they would “closely monitor pension reform developments in the UK”, which they said “contrasted heavily with the German and French systems”.
PricewaterhouseCoopers partner Peter Tompkins agreed that the German insurance fund would be a “far sounder model” for the Pensions Protection Fund.
Tompkins added: “I thought we might end up nearer the German fund when I saw the Green Paper ideas, but I was deeply disappointed to see we are going down a route mimicking the flawed American model.”
An innovative funding structure has been agreed for Croydon Pension Fund. However, there are some concerns about the arrangement. Stephanie Baxter reports
Some 52% of red flags raised by schemes on suspected scam pension transfers involve advisers or unregulated introducers, a report by the Pension Scams Industry Group (PSIG) has claimed.
In this week's Pensions Buzz, we want to know whether bosses should have to pay into the same staff DB scheme as their workers rather than their own executive pension fund.
The Norfolk Pension Fund has been successful as the lead plaintiff in a class action case that went to jury trial in California involving securities fraud.