The Pension Protection Fund (PPF) is to be driven into the red less than two years after it was created - after a preliminary agreement to take on the troubled £1.9bn scheme of the car parts manufacturer Turner & Newall.
According to pensions consultant John Ralfe, the PPF now has 80 schemes heading on to its books, with deficits totalling much more than the £725m it will have raised in levies over its first two years.
Writing in a note for RBC Capital Markets, Mr Ralfe said: "Even with no unexpected large losses for the rest of this year, the PPF's overall losses will be significantly more than its income from the levy. The PPF is charging too little for the economic risk it is bearing. The economic charge, even before considering the risk of asset allocation mismatch, is around £1.3bn, twice the current levy. It is not clear how the PPF will balance its books in the medium term."
But Paul Reynolds, a spokesman for the PPF, dismissed Mr Ralfe's comments. "This is exactly what we've been set up to do," he said. "The risk-based levy is set for the long term, not the short term. T&N has assets of over £1bn - which will be enough to pay pensions for the next 20 years."Reuse content