UK - New safeguards for members of occupational pension schemes come into force today.
The government is launching the Pension Protection Fund (PPF) and a new Pensions Regulator as part of the Pensions Act 2004.
The Regulator will have so-called “moral hazard” powers to ensure companies are taking the necessary steps to fulfil their pension obligations to employees while the PPF will compensate members of defined benefit and hybrid schemes in the event of insolvency.
Only members of schemes wound up after today will be eligible for compensation under the new PPF, while employees’ whose schemes collapsed between January 1 1997 and April 5 could qualify for compensation from the government’s Financial Assistance Scheme (FAS).
Ray Young, CEO of 3Q Solutions, said the new protection measures would help restore consumer confidence in the saving environment.
However he warned the compulsory levy being charged to company pension schemes would have to be controlled.
“This is an added pressure which is being put onto existing defined benefit schemes and could lead to more employers moving towards defined contribution schemes as defined benefit schemes become too expensive to manage,” he said.
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Work and Pensions Committee (WPC) chairman Frank Field has questioned the regulator on what lessons it can learn from the experience of the Kodak Pension Plan No.2 (KPP2).