The criticism came from Shadow Work and Pensions secretary David Willetts following publication of the proposal for a compulsory scheme to guarantee scheme members do not lose their pensions when employers become insolvent.
The government said there would be a risk-related premium pitched according to the degree of underfunding of each scheme, the cost of which may be partly covered by a reduction to 2.5% a year from 5% in the allowance schemes must make for future inflation.
Existing pensioners would receive 100% of benefits and other scheme members not yet retired would receive 90% of accrued savings instead of possible 100% losses under current legislation, which ranks existing pensioners above the rest.
Willetts said this was not planning for success, reform of benefits or encouragement to save.
He protested: ‘What we have got is insurance for failure…that is not good enough, given the scale of the crisis which our country faces in its occupational pensions.’
Liberal Democrat Shadow Work and Pensions secretary Steve Webb said the proposals could amount to a crackdown on insolvent companies trying to close schemes and safeguard scheme members.
He warned of the scale of costs if major schemes collapsed, suggesting the insurance scheme would have to be able to borrow and require government guarantees.
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