More than 1,000 companies have paid extra money into their British pension schemes over the past year as a raft of new legislation has forced businesses to address the growing deficits in their pension funds.
Revealing the numbers at the National Association of Pension Funds' annual conference yesterday, the Pension Protection Fund (PPF) chairman, Lawrence Churchill, said the figures illustratedthe success of the first year of the new regime. He said more than 100 companies had taken advantage of new rules allowing them to secure their pension liabilities against a company asset in an attempt to reduce their PPF levy and enhance security for scheme members.
The PPF was launched about 14 months agoto provide a safety net for pension schemes in the event that their sponsoring employer goes bust. It charges all defined-benefit schemes a levy each year, based on the size of their liabilities compared to the size of the organisation, and also based on the likelihood of the company becoming insolvent.
Companies were given until the end of March this year to shore up their schemes, before the first annual risk-based levy was calculated by the PPF.
A handful of companies, including the likes of HSBC and Royal Bank of Scotland, have made one-off cash injections of £1bn or more into their schemes over the past 18 months.
Earlier this year, the troubled furniture retailer MFI promoted its pension fund to secured creditor status, giving it the first call on its Howden Joinery business in the event of insolvency.
There are almost 70 pension schemes being assessed for admission into the PPF, most of whom saw their employer run into financial difficulty before the fund was created last year.
Analysts have expressed concerns that the PPF may run into financial difficulty itself if it is landed with several of the big schemes - such as Turner & Newall's £1.6bn fund. The PPF's US equivalent, the PBCG, is severely underfunded after failing to raise enough money prior to the collapse in world stock markets between 2000 and 2003.
The Work and Pensions Secretary, John Hutton, announced at the conference government plans to create a new red-tape-cutting initiative in the pensions industry. He said the Government plans to establish a "simplification advisory group", which will be created in partnership with the industry. "Our objective is not about merely rewriting legislation or tinkering around the edges, but a real drive to cut red tape and to make it easier for you to deliver workplace pensions," he said.
Responding to criticism that many of the recent White Paper's recommendations will not come into force before 2012, hesaid the Government wanted to get to work immediately on reversing Britain's ailing savings culture.Reuse content