UK says it will learn lessons of US PBGC
UK – The UK government says it will “learn lessons” from the US Pension Benefit Guaranty Corp. when it sets up its new Pension Protection Fund.
“We’re not here to copy from the American institution,” said pensions minister Andrew Smith. Referring to the PBGC’s “inflexible levy”, he said: “That’s certainly one lesson we’ll learn.”
Speaking at a conference organised by the employers body the Confederation of British Industry and Mercer Human Resource Consulting, Smith said well-funded pension schemes would pay a lower levy and that the long-term strength of the sponsor would be taken into consideration.
The proposed PPF was “an essential building block” of the government’s pension strategy, he added. The PBGC this week announced that it was 8.8 billion dollars in deficit.
Smith added that the department was thinking of limiting rights under the scheme to a salary level of around 40,000 pounds.
The comments come amid a spat between the CBI and the main trade union body, the Trades Union Congress, over the Pension Protection Fund.
The CBI says its members have “serious reservations” about the plan and that it could have a damaging impact on occupational pension provision. It says employers with defined benefit schemes would have to bear the full costs of the fund.
But the TUC’s general secretary Brendan Barber says employers are “crying crocodile tears”. “Let's not forget it was employers who took pensions holidays, and didn't pay in when times were good, and employers who've been retreating from their pensions obligations, closing decent schemes, reducing their contributions, shifting the burden to their employees and leaving many workers high and dry.”
Barber said the fund is “simply an insurance scheme, with contributions based on risk”.
Smith told delegates that it was important that the CBI and its members recognise the principle of the PFF. “It’s clearly important to keep costs as low as possible,” he said.
Smith also denied that the abolition of dividend tax credit, estimated to cost UK pension funds up to five billion pounds year, was a mistake. He said the move was part of a wider tax reform – and that no other political party is advocating its return.