Pension experts have revealed that the scheme set up to protect final salary pensions could be in trouble.

Pension shortfalls recently hit a record high which has put the Pension Protection Fund (PPF) in danger of being submerged from a significant increase in claims being made from companies that have gone bust.

According to the findings, up to 91% of final salary schemes can’t afford to pay out benefits, with the under-funded schemes carrying deficits of more than £228 billion.

The PPF takes around £700 million from companies every year, but this has proved too little and doesn’t cover its liabilities. The PPF has a deficit of around £550 million.

The PPF has already carried the weight of 62 schemes that failed, which include Woolworths, and Lehman Brothers.

This has sparked growing concerns that the failure of more schemes could result in the PPF collapsing, leaving companies at risk of bankruptcy and vulnerable to loss of employee pensions.

The government has been called on by The National Association of Pension Funds to back the scheme and act as a safety net, but the government has yet to comment.

NAPF Chief Executive, Joanne Segars, said: “In these exceptional times, maintaining confidence and security in pensions is vital so it would be a sensible measure for the Government to be the ultimate guarantor of the Pension Protection Fund.”

Vince Cable, Treasury spokesman for the Party, said: “I get a very strong sense that this is the Titanic hitting the iceberg. It is potentially very vulnerable in a serious recession, which is what we are now getting into. Companies won’t be able to sustain the fund in its present form. The Government has to be explicit that it is standing behind it.”

The possible issues were identified following a survey conducted by Punter Southall, revealing that 60 percent of pension schemes are oblivious of how their funding is being affected by the recession.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals






No related posts.