CBI calls for radical rethink of PPF proposals

The
Confederation of British Industry is pressing the Government for a radical
rethink of plans to protect pension scheme members against company insolvency.

The
current Pension Protection Fund (PPF) proposals set out by the Government put
too much of the burden on business, according to the Confederation of British
Business (CBI).

Under
the PPF proposals, people who have already retired will be guaranteed 100 per
cent of their pensions, and those in employment 90 per cent of the savings they
have built up.

Unilever
UK chairman Richard Greenhalgh, who also chairs the CBI’s Pension Strategy
Group, said: "Employers cannot take on an even greater role in pensions
without the Government providing effective support."

"The
entire burden is placed on employers, while the Government refuses to share any
risk," he said. "Moreover, scheme members, as the ultimate
beneficiaries, should at least share some of the cost."

The
CBI say the Government must learn from the US experience of pension protection
– the US has a fund that is £8.8bn in deficit. It says ministers should:


Act as guarantor to the fund – the PPF could create a false sense of security
as a string of insolvencies could leave the fund unable to deliver. Employers
face a potentially open-ended commitment, especially damaging during a
downturn.


Measure effectively the risk of company or pension scheme insolvency – business
is concerned employers with low-risk schemes will subsidise employers with
high-risk schemes. As suggested, the levy only looks at risk of under-funding,
not risk of company insolvency.


Give employers the option to ask employees to share the burden – the CBI says
the Government must make pensions a shared responsibility. The Government
should allow firms the option to charge scheme members by deducting money from
pensions or pay.


The CBI also wants the Government to cap the levy, saying it should not
increase by more than the rate of inflation. This would give employers greater
certainty over cost and prevent the levy becoming "a bottomless pit".

By Ross Wigham

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