UK/US - Government policy advisers are being sent to the US to look at how its pensions central insurance fund works and identify any pitfalls.
The team – which will comprise senior staff from the Government Actuary’s Department and the department for work and pensions – will leave in September. It will be headed by deputy government actuary Andrew Young.
The group will look at the affordability of a Pensions Protection Fund and how much schemes should be levied.
The US Pension Benefit Guaranty Corporation – which has around one-third of its assets invested in equities – last year posted a record loss of $12bn (£7.5bn).
And many UK experts fear the proposed PPF will be hit even harder as preliminary figures show it could be 50% invested in equities.
One source said the government believes it could make the PPF work relying on the outperformance of equities over the long-term.
“But what the PBGC found is that by relying too much on equities, the volatility of their assets has been too high, which means they can’t be sure that they can meet their commitments,” he said.
PricewaterhouseCoopers partner Peter Tompkins said: “This is preposterous – the idea of having a fund that’s trying to guarantee things which invests in unsecured assets like equities.
“The very point of having a guarantee fund which the UK private sector is standing behind – there’s no government guarantee – is that it should protect the benefit liabilities it has got.”
Association of Consulting Actuaries chairman Gordon Pollock added: “This will expose it to additional risk and if the additional returns from equities are not forthcoming it would mean that the government would have to increase the levy.
“That’s undesirable, because it will mean few schemes that will pay the levy.”
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers