Pensions funds pushed to brink by downturn, says bailout fund

Click to follow
The Independent Online

Britain's pension bailout fund will today warn that the UK's economic problems are pushing more pension schemes to the limit.

The Pension Protection Fund (PPF), which protects employees of bankrupt companies, will insist that its funding position is "robust". But its chief executive, Alan Rubenstein, conceded last night that levies on existing pension schemes will have to rise to ensure it can meet its goal of being self-sufficient by 2030.

The PPF will today publish its accounts which show that at the end of March this year it had a £1.07bn surplus over liabilities, up almost £391m on the previous year. Membership increased to 128,000 people, and it was managing £11.1bn of assets, a rise of £4.7bn from 2010/11. The PPF will also hail a 25 per cent return on its investments.

But pension experts warn that the figures could be misleading. The independent consultant John Ralfe said that liabilities also increased by 22 per cent, and the 3 per cent net return has been driven by low interest rates and could evaporate when they start to rise again. He also highlighted fund management fees which have doubled from £26m to £53m.

"To consider the PPF's overall health at April 2012 we should compare £17.3bn assets, with £16.2bn liabilities, a funding ratio of 107 per cent, unchanged from 2011. So the PPF's overall funding is unchanged over the year. No worse, but no better either," he said.

"Looking at performance this year, is the £600m charged by the 2012 levy enough to pay for the deficits in the new schemes taken on by the PPF during the year? New schemes taken on had £3.7bn liabilities against £2.5bn assets, so a £1.2bn deficit during the year. This is exactly double the £600m annual levy for the year," he warned.

Mr Rubenstein said: "If we are to hit our long-term funding target, levies will have to rise. We have said that at moment we can afford to give companies some breathing room and not increase fees. But 2013-2014 levies will increase if we are to stay at current levels and have a properly funded PPF, but equally, if economic growth returns and markets perform well, then deficits will shrink, which will mean our liability exposure will fall commensurately."