Not the quietest of weeks for the Pension Protection Fund.
The Fund was set up four years ago in response to growing clamour from pensioner lobby groups to provide compensation for people whose DB pensions fail to pay out when the sponsoring employer goes belly up. The initial funding comes from a levy charged by the PPF on all DB schemes, the level of which is determined by each scheme’s exposure to risk – the greater the exposure, the higher the levy.
Earlier this week, it was reported that Transport for London is seeking a legal review of the levy imposed by the PPF. TfL claims the levy is "unreasonable", and other DB providers with similar concerns about the unfairness of the levy will no doubt be awaiting the outcome with interest.
And today it emerges that the Fund’s deficit more than doubled in the year to March 2009, from £517 million to £1.23 billion, prompting – according to the Telegraph – "questions about the viability of Britain’s pensions lifeboat".
Before anyone presses the panic button, however, it’s worth bearing a couple of things in mind. Firstly, as PPF Chief Executive Alan Rubenstein recently pointed out, the PPF is currently paying out around £7m a month to its 13,000 beneficiaries, and while these numbers will increase in the coming months, the Fund already has some £3bn in assets, so "let’s not pretend there are not extreme scenarios out there that could see us run out of money, but that will not be happening in the foreseeable future".
And secondly, Mr Rubenstein and his colleagues are smart enough to have learned from the American experience. The US equivalent of the PPF, the Pension Benefits Guaranty Corporation was set up in the mid seventies, and has amassed an eye-watering $33 billion deficit. Even so, the debate in Washington is around how to fix the PBGC, not how to get rid of it. What politician, after all, would want to be seen as the individual who allowed a lifeboat to sink?