UK's PPF Wants Charge Based On Risk

July 13, 2005 ( - The UK's Pension Protection Fund (PPF) wants to introduce a risk-adjusted charge to retirement plans by the 2006 -2007 financial year, Reuters reports.

The PPF, Britain’s pension insurance program, started up in April (See  Britain’s Answer to PBGC Opens for Business ), and will be financed from a flat fee during at least its first year of operation, according to Reuters.   Going forward it wants a charge based on a company’s insolvency risk calculated using data from credit specialists.   Companies would fall within 10 separate risk bands ranging from strongest to weakest, according to the report.

The PPF said the charge would be capped at a fixed percentage of retirement plan liabilities to protect the weaker pension plans.   Reuters reports that the insurer will publish its estimate of the size of the risk-based charge on November 30.

The PPF said it would initially invest in government bonds, non-government debt, index-linked debt, cash and related derivative instruments.   According to the Reuters report, the British government said it would not underwrite the PPF with taxpayers money.