Businesses cannot continue to absorb the escalating cost of the Pensions Protection Fund (PPF), the CBI has warned.
The government has revealed that the ceiling for the PPF levy in 2006-07 will be £775m – more than double the original £300m estimate.
John Cridland CBI deputy director-general, said: “Business saw that sum as a price worth paying to protect scheme members’ benefits, but the potential for an increase to £775m in the first year of operation would be wholly unacceptable to UK firms.
“Many now view the additional cost of the PPF as little more than a tax on their pension scheme, and fear that total annual costs could continue to spiral.”
The PPF was set up last year to provide a financial safety net for people in pension schemes that go bust.
Cridland questioned the logic of paying millions of pounds into a fund that most companies would never need.
He said organisations could instead use that money to reduce their pension scheme deficits.
The CBI has called on the government to take action to reduce the cost of the PPF, and to publish estimates of future levy costs so that employers can manage their finances.