Minister’s pension lifeline could spell ‘catastrophe’

Minister's pension lifeline could spell 'catastrophe'

Pension fund trustees could force companies into insolvency under the new PPF scheme.

Link: Pension protection fund threatened

More companies could go bust after the government’s pension protection fund (PPF) was broadened out to potentially cover schemes including Turner & Newall’s, which has a £500m pension deficit, before the official start date of April next year.

The government was warned that it risks a ‘catastrophe’ if pension fund trustees force companies over the edge, knowing that the employer-funded ‘safety net’ would catch pension scheme members.

Malcolm Wicks, the minister of state for pensions, prompted the concerns after apparently throwing a lifeline to pensioners whose employers become insolvent before the PPF’s start date.

Wicks told parliament: ‘Eligible schemes, whose sponsoring employer has already entered insolvency proceedings may still be able to receive PPF compensation.’

But Gary Cullen, a partner with law firm Maclay Murray & Spens, warned of dire consequences.

In a letter to the Department for Work and Pensions, he wrote: ‘This would place an unbearable burden upon the PPF within its first few months of existence, which could have a catastrophic effect upon its future.’

He told Accountancy Age the policy could also cause an insolvency double whammy, with some cash-strapped companies being forced out of business by trustees, and others being crippled by spiralling contributions to the PPF to help bail out their pension schemes.

If that were to occur at major companies such as Turner & Newall ‘the PPF could already have £1bn liability before contributions are put into it. It would be bust before it even started’, he said.

A DWP spokeswoman claimed it was not worried about the PPF being overloaded on day one.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource