Greenhalgh Urges a Reshaping of UK PBGC Proposal

Addressing a Confederation of British Industry (CBI) conference, Greenhalgh urged the government to spread the costs and risk of its proposed equivalent of the PBGC – the Pension Protection Fund (PPF). As the proposal now stands, all the costs of the PPF would fall on the shoulders of the firms,according to a report on PLANSPONSOR.com’s sister publication, GlobalCustodian.com.

Such a move would brand the employers“the villains of the pensions piece,”Greenhalgh said in his speech, when in fact, the firms are committed to pension provision and that people should have protection against employer insolvency. Publishing the results of a major CBI consultation, he also said the current PPF proposals put too much of the burden on business.

“Employers cannot take on an even greater role in pensions without the government providing effective support,” he said. “We are concerned the PPF will not deliver increased security at acceptable cost. The entire burden is placed on employers while the government refuses to share any risk. Moreover, scheme members, as the ultimate beneficiaries, should at least share some of the cost.”

As evidence of the potential pitfalls with the current structure, the CBI report points to the PBGC’s recently reported $8.8 billion deficit, which is created in large part due to the lack of funding the PBGC receives from the United States government.   Instead, the CBI report suggests the UK government act as a guarantor to the PPF, measuring the risk of the company or pension scheme insolvency, on the grounds that employers with low-risk schemes will subsidize employers with high-risk schemes.

Additionally, the report wants employers to be given the option to ask employees to share the burden. The CBI says the government must make pensions a “shared responsibility,” by which firms could charge scheme members by deducting money from pensions or pay.