Employers must pay £675m into Pension Protection Fund in 2007

UK employers will have to pay out a total of £675m in final salary pension schemes to the Pension Protection Fund (PPF)  next year.

The 2007 levy is more than double the amount collected in 2006, which totalled £324m.

The exact amount each company will have to pay will vary depending on the firm’s pension deficit.

Last month, British Airways, which has an estimated £2.1bn pension deficit, was hit with a £5.15m tariff for the year, while food manufacturer Tate & Lyle was charged £83,000 on its £77m deficit.

Separate research by Alexander Forbes Financial Services revealed that almost half of employers who offer defined benefit pension schemes expect to close them within the next five years due to soaring financial costs.

Susan Anderson, CBI director of HR Policy, warned that employers would struggle to reach the costs. “Against a background of historically high contributions to company pension schemes, the cost of the PPF is a real concern to business, and the
volatility of the levy makes it difficult for companies to plan ahead,” she said.

Paul Greenwood, worldwide partner at Mercer HR consulting, said the PPF must ensure it had sufficient funds to ensure the safety of its members. “The PPF has recognised that higher levies are needed next year, but the new target is still wide of the mark to secure members’ benefits in the longer term.  The fund is relying on benign economic conditions to continue in order to meet its obligations,” he said.

 

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