PPF covers 98 pension schemes in first year
UK - The Pension Protection Fund (PPF) has already accepted 98 pension schemes into its assessment period since opening its doors in April last year, the organisation announced today.
Publishing its first annual report and accounts, the PPF said that "as a result, 43,000 pension scheme members now have increased security in retirement", 10,000 of which are already receiving payments from their pension schemes at PPF levels of compensation.
The organisation also announced that it has collected and invested £138m(E193m) in first year's levy.
PPF chairman Lawrence Churchill added: "Our accounts currently show a deficit of £343m, which is in line with initial expectations," but, he warned "we must not be complacent about the future."
Churchill emphasised that his organisation has sufficient assets available to meet compensation payments as they fall due and said that the PPF aims to raise its solvency level of 86% funded as the organisation and the fund matures.
However, after the publication of the report investment consultant Mercer said that claims on the PPF are running well above the levies it is collecting, this is in spite of "benign economic conditions".
Also other investment consultancy firms warned that levy rises are inevitable as the real cost of the fund emerges.
Stephen Yeo, a senior consultant at Watson Wyatt, said that though the PPF are to be congratulated for making good progress, "employers will be concerned that despite a claim rate of less than the expected long-term average, the accounts show a deficit for the first year of operation of £343m and disclose further contingent liabilities, where a claim is possible rather than probable of £483m."
Also consultants pointed out that the expected income from the protection levy in 2006 and 2007 will be £324m, which is little over half of the £575m target.
Lawrence Churchill told Radio 4's Today Programme this morning: "When we announce the £575 [million] we said this is not representative of the true rate for risk - it's a lot less than that," adding "We didn't want to overburden business by charging them the true rate for risk in the early years. We want to encourage and incentivise them."