UK - Industry leaders have attacked government plans to phase-in a risk-based levy for the Pension Protection Fund over six years.
Pensions minister Baroness Hollis was forced to admit a full transition from the initial flat-rate funding would not take place until 2011.
Hollis told peers the risk-based levy would be “phased in” over two-to-five years before full implementation in the sixth year.
The government initially assured the industry that the transition from a flat-rate to risk-based levy would be just 12 months to prevent sound, well-funded schemes paying for those that were high-risk.
National Association of Pension Funds chairman Terry Faulkner said the new timetable was “absolutely unacceptable”.
He added: “The purpose of the PPF is to protect benefits from those companies that go bust with an underfunded pension scheme. The right way to deal with the premium is on a risk-based basis like other forms of insurance. We understand data needs to be collected, but we would expect it in by 2007.”
BT Pension Scheme chief pensions officer Colin Hartridge-Price agreed.He said: “The risk-based levy should be introduced in full as soon as is practicably possible. It should surely be possible for the PPF Board to agree a formula within the first 12 months of its operation.”
Mercer Human Resource Consulting worldwide partner Peter Thompson said the move indicated that the government was trying to hide the real cost of the PPF.
“Even government will admit its assumptions about the cost are low and it could vary vastly from one year to another,” he said.
A department for work and pensions spokesman said it would consult on the plan.
“We are aware industry wants to move to a risk-based levy as soon as possible, and that is something government is aiming for as well. The sooner it can be brought in, the better for everybody.”
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