UK - The UK Pension Protection Fund (PPF) is aiming to be "financially self-sufficient" by 2030, according to its long-term funding strategy.

The PPF said it would meet its funding target through investment returns, proceeds from the assets of schemes brought into the PPF and the pension protection levy.

By 2030, the PPF also expects to have eliminated its exposure to "interest rate, inflation and other market risks".

Alan Rubenstein, chief executive at the PPF, said the long-term strategy revealed to the public the work the organisation had been doing "behind the scenes" for more than five years.
He said: "It's important we expose our plans so we can show how we intend to ensure we have the financial resources needed to pay existing levels of compensation to current and future members of the PPF - and become self-sufficient by the time the level of risk to the PPF from future insolvencies has reduced substantially."

The UK National Association of Pension Funds (NAPF) welcomed the PPF's "ambition", but questioned its approach to levies.

Joanne Segars, chief executive at the NAPF, said: "The key will be to find a balance between a prudent route to self-sufficiency and an overly cautious approach that saddles firms with higher levies.

"As the PPF admits, the switch from RPI to CPI will have a great impact on its funding strategy - that must be reflected in the levies companies have to pay.

"Also, the government must acknowledge it is the guarantor of last resort for the PPF, should its long-term plan not be realised.

"Although the long-term view of self-sufficiency is welcome, vital short-term issues need to be addressed.

"The PPF is still working on reform of the risk-based levy, and it must get this right over the coming months."

Lynda Whitney of Hewitt Associates welcomed the PPF's move towards self-sufficiency, saying it was gratifying to see the organisation undertake measures similar to many pension funds.

She further predicted that the current £700m (€574m) levy brought against pension funds could reduce, as it did not yet take into consideration the switch from the retail price index to the consumer price index.

"When they do make allowance for this we could see total levies reduce by as much as £200M," Whitney said, adding that was possible that while the levy itself was not set to increase, with the number of eligible funds would reduce in the future, meaning individual schemes would be left to pay more.

Nick Griggs of Barnett Waddingham said the proposal followed a reasonable timeframe, but added: "The assumption that the total levies collected stays at £700m seems strange given less schemes will be paying a higher levy at a time when their risk to the PPF is reducing."

Griggs went on to question why the organisation was not looking at minimising longevity risk and said that the PPF's 'buffer' proposal, which meant the levies raised would in ideal actuarial circumstances produce 10% more revenue than needed, was "overly conservative".

Mike Smedley, pensions partner at KPMG, said that if the PPF opted not to build up a projected £8bn buffer in this way, then levies could be lowered by £200m.

"We wonder if the PPF may be being over-cautious and thus placing an additional and perhaps unnecessary burden on levy payers," he said.

Smedley said that a reduced levy would allow private sector schemes to improve their funding positions. He also questioned what would happen to the additional funding.

"And you have to wonder what they might do with the projected £8bn windfall in 2030 - will they increase payments, return it to pension schemes or will government claim it," he said.