UK - The government has rejected "unfounded" claims that the Pension Protection Fund will give members less than a third of their benefits.
The attack comes after research from transfer specialist O&M Systems claimed that instead of guaranteeing members 90% of their benefits, the PPF would leave many members with just 31% cover.
O&M said the fund only promised a “specified minimum” pension and not any of the additional benefits that members currently receive.
O&M also pointed out that the “90% guarantee” only became active at the date the scheme announced the wind-up and was not subject to revaluation during the period up to retirement. So the real value of the guarantee would fall during that period.
The department for work and pensions rubbished these claims: “This research is based on a series of unfounded assumptions. The government has yet to announce the detail of the PPF guarantee, such as what indexation, revaluation and survivor provisions it might offer.”
But O&M director Graham Miller explained if this was the case the levy on schemes to support such benefits would increase massively.
“The cost of providing a comprehensive scheme rather than a minimum guarantee would increase the cost of the levy by as much as three times the basic level of benefit,” he said.
“Most employers were considering the viability of maintaining their DB schemes before this proposal was announced. The higher cost of maintaining a comprehensive scheme will certainly speed up the closure of schemes, leaving fewer to fund the levy.”
PwC partner Peter Tompkins agreed and said: “Although one expects it is trying to protect 90% of members’ full benefits, it looks like the government has still got the right to pull back on pension increases.”
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