BusinessBusiness RecoveryPension protection fund threatened

Pension protection fund threatened

The government's pension protection fund (PPF), designed to protect pensions when companies go bust, could be 'wiped out' in the event of a large corporate insolvency, according to a pensions specialist.

Link: Analysis: Pensions’ crisis management

The warning follows findings that the US Pension Benefit Guaranty Corp, on which the PPF is based, could run out of money in the event of bankruptcies of major airlines.

Gary Cullen, pensions partner at law firm Maclay Murray & Spens, warned the PPF may not be a ‘white knight’, particularly if it took a big hit before sufficient reserves were built up. ‘How do we know the PPF will remain solvent for very long? America introduced one 10 years ago and it’s not in good shape. You only need a large company to go bust and the PPF would be wiped out for years,’ he said.

From April next year, the PPF ‘safety net’ will guarantee the lesser of 90% or £25,000 for defined-benefit scheme members not yet at pension age and frozen benefits for those who are.

The Department for Work and Pensions said the scheme could deal ‘with the possibility that major firms may go bust without recourse to government’.

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