UK - The Pensions Protection Fund needs to safeguard pensions up to £60,000 a year to encourage senior managers to keep schemes open, manufacturing employers claim.
The current proposals only protect income up to a maximum of £25,000 but the EEF believes this is insufficient to promote “pensions inclusively”.
Deputy director of employment policy David Yeandle (pictured) says the limit should be raised to include people on salaries of up to £99,000 a year.
He said: “More senior managers would see they might stand to benefit from the PPF and therefore have more of a vested interest in retaining their schemes.”
But the Confederation of British Industry did not think firms would agree to the additional cost while the National Association of Pension Funds said the majority of people would fall “comfortably under the £25,000 limit anyway”.
Meanwhile, consultants have dismissed government estimates that the PPF will cost UK firms £300m per annum as “absurd”.
Pensions minister Malcolm Wicks said in its first year the PPF would cost companies £150m and each scheme member £10.
The figures would double when the risk-based levy was introduced 12 months later.
And if the PPF finances were overextended by claims, the board had the power to double the flat-rate levy to make up the shortfall.
But PricewaterhouseCoopers partner Peter Tompkins said the government’s cost analysis was “nonsense”.
Independent consultant John Ralfe agreed and claimed the PPF charge should be over £600m to cover the equity risks carried by schemes at FTSE100 companies alone.
He also predicted the government would be forced to bail out the PPF. “As soon as it takes over a scheme with a large deficit, its reserves may be exhausted. In which case, it would face insolvency. If, and when this happens, it seems implausible that the government would not step in.”
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