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IPE special report May 2018

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UK seeks advice from US on protection fund

UK – The UK government has met with the former head of the Pension Benefit Guaranty Corp. as it seeks advice for its planned Pension Protection Fund.

Steven Kandarian, former executive director of the PBGC, said: “I have had conversations with people in the UK.” He said officials had visited him in the US and said: “Now’s the time to really learn the lessons we’ve learnt in the US as you build your system up front."

"It’s important to you to have the tough discussions up front," Kandarian said in a lecture organised by Watson Wyatt. “It’s very difficult to change a system once it’s put in place.”

He described having to deal with entrenched positions in Washington – and difficulties due to the fact that the executive director role was not defined when the PBGC legislation was enacted in the 1970s. All his power, he said, derived from the Secretary of Labor – who sits on the board alongside the Secretaries of Commerce and the Treasury.

He says he had to fight for influence. “One of the problems with this system is that the executive director gets status by pushing his elbows out,” he said. He also said that the long-term nature of the issue takes pressure off policy makers.

He commented on the possibility of making a protection fund based on the risk model. “If you want top build a risk-based system you can – there is data out there. It’s not like you can’t figure out the risk piece if you want to.”

“The best armour of all is to get these plans better funded,” he concluded.

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