Personal Pension  

MPs to investigate Pension Protection Fund

MPs to investigate Pension Protection Fund

The Work and Pensions select committee has revealed it plans to investigate the Pension Protection Fund.

At present, the Pension Protection Fund is funded by an annual levy on defined benefit schemes and has assets of more than £20bn.

In its inquiry, the committee will consider a number of points, including the adequacy of defined benefit pension scheme regulation and regulatory powers, in general and specifically in relation to the pension schemes of complex and multi-national companies

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Additionally, it will look into the use of these powers by The Pensions Regulator in recent cases, including BHS.

This follows news earlier this week that The Pensions Regulator is looking at whether the owner of British Home Stores will have to plug holes in the collapsed retail chain’s pension fund.

On Monday (25 April) the group officially went into administration, after 88 years of business, putting 11,000 jobs at risk.

It has been rumoured the regulator is considering whether Sir Philip Green, the former owner of BHS, should be made to put more funds into the retailers scheme to fill a pension deficit of half a billion pounds.

In its inquiry into the Pension Protection Fund, the committee will also consider resourcing and prioritisation of The Pensions Regulator supervisory work, and implications of the regulatory approach for company behaviour, including whether it mitigates or incentivises moral hazard.

The review will also consider the sustainability of the Pension Protection Fund and the fairness of the PPF levy system and its impact on businesses and scheme members.

Frank Field, Labour minister of parliament for Birkenhead and chair of the Work and Pensions select committee, said: “We need as a committee to look at the Pension Protection Fund and how the receipt of pension liabilities of BHS will impact on the increases in the levy that will now be placed on all other eligible employers to finance the scheme.

“We will then need to judge whether the law is strong enough to protect future pensioners’ contracts in occupational schemes.”

Tom McPhail, head of retirement policy at Hargreaves Lansdown, said many people will find it shocking that BHS, a company which has been so successful in the past, could leave its employees’ pensions so short of cash and in such a short space of time.

He said: “They are now likely to end up dependent on the Pension Protection Fund, which is paid for by a levy on the rest of the UK’s final salary pension schemes.

“The fund is currently in surplus, with around 115 per cent of the money needed to meet all its promises; it has assets in excess of £20bn, so whilst this situation is clearly not good news for the current and former employees of BHS, there is a robust safety net there to catch them.”