UK Pension Insurer to Consider Special Pension Contributions

October 14, 2005 ( - Officials at the UK Pension Protection Fund (PPF) take into account special cash contributions made by employers to make up funding deficits in their pension plans while calculating employer insurance levies.

From April 2006, the PPF will charge a risk-based fee that will take into account the level of underfunding of an employer’s pension plan, the risk of insolvency of the sponsoring employer and the amount of benefits that the fund would have to pay if the pension plan were accepted into the PPF, Business Insurance reported.

The PPF said that as a result of public feedback, it would include the special contributions made by employers into their pension plans in its calculation of pension plan underfunding. Plus, the PPF said it would also consider the use of contingent assets – such as letters of credit – used by employers seeking to address their pension funding deficits.

The PPF also said it would put off until March 31, 2006, a deadline for employers to provide the PPF with their valuations of pension fund assets and liabilities, as well as information about the structure of their pension plans.

The London-based Confederation of British Industry, which represents employers in the United Kingdom, welcomed the PPF’s announcement.  “It is vital, when calculating the levy, that the PPF takes into account the additional forms of security which companies are able to provide against their pension scheme liabilities,” the CBI said in  a statement .