PPF considers shift in levy payment strategy
UK - Pension Protection Fund executives are discussing a series of potential changes to the funding of the pensions lifeboat which could eventually see employers contribute higher levy sums during positive economic cycles but make lower payments during times of recession and market downturn.
A spokesman for the PFF today confirmed internal discussions have been had between Alan Rubenstein, the PPF's new chief executive who was previously head of Lehman Brother's Pensions Advisory Group, and the management team to find new ways of ensuring the PPF is sufficiently funded to meet its liabilities, though no formal proposals are being tabled at this stage.
The PPF manages its assets much like any other defined benefit pension fund and seeks to apply a diversified asset allocation strategy suited to its payout needs, to ensure it can make payments to pensioners who were part of a collapsed defined benefit pension fund but are now given some form of protection.
That said, the PPF recently announced the 100th company to be covered by the scheme has now been incorporated and the potential liabilities the lifeboat fund faces could be high given current market conditions.
The PPF spokesman said the PPF is keen to ensure it helps pension funds and companies who are struggling to keep a scheme afloat so has been looking at a series of funding options, such as the stalled payment of the PPF levy, to help get companies and schemes through recession.
That said, he noted no change at the PPF could be done in isolation as the government has its part to play in helping companies and in reducing the burden of the rescue fund levy.
Whether the PFF has sufficient funding to meet its liabilties is important as the PPF announced last week it would increase the maximum sum a person can receive from the fund at age 65 to £31,936 (€35,281) if they were already retired when their company scheme went bust.
That means the sum received has risen by 3.5% - the same amount paid to those who have already taken early retirement.
Individuals who have yet to retire will now receive a maximum potential payout of 90% of their annual pension fund entitlement or £28,742.68, said the PPF.
The average payout actually being given to people whose schemes have transferred into the PPF is approximately £4,000 a year.
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