Welfare Reform on the Web (March 2004): Pensions - UK

PENSION SAFETY NET "WILL FAIL WITHOUT TOP-UP FUNDS"

T. Thorniley

Daily Telegraph, February 20th 2004, p.35

Reports concerns that the Pension Protection Fund proposed in the Pensions Bill will fall into deficit and collapse unless companies are forced to make up shortfalls in their pension funds. Swiss investment Bank UBS estimates the shortfall between value of pension funds and the cost of meeting all liabilities was around £28bn for FTSE 100 company pensions schemes in December 2003.

PENSIONS BILL

London: TSO, 2004 (Session 2003/04; Bill 57)

Provisions include:

• a new pension protection fund to compensate final salary scheme members if their employer goes bust;
• peplacement of Opra with a new regulator which will focus on fraud, under-funding and maladministration;
• peduction of protection against inflation by halving the indexing of final salary pensions from 5% to 2.5;
• awarding a lump sum of up to £30,000 to people who defer taking their state pension for five years.

(For comment see Daily Telegraph, Feb.13th 2004, p.33; Independent, Feb.13th 2004, p.23; Financial Times, Feb. 15th 2004, p.4; Times, Feb.15th 2004, p.28)