A significant change to the Pension Protection Fund's rules is on the horizon, which could help troubled schemes such as Tata Steel.
Yesterday (15 December), the Pension Protection Fund announced it may consult on a rule to allow it to charge its levy on pension schemes not backed by an employer.
In June this year, the trustee of one of Britain’s biggest defined benefit pension schemes urged members to support cuts to their benefits, in a move that is likely to have ramifications for the entire sector.
At that time, in a letter to the British Steel Pension Scheme’s 130,000 members, trustee chairman Allan Johnston appealed to members to accept “modified benefits” to save the scheme’s sponsor, Tata Steel, and prevent the scheme falling into the Pension Protection Fund (PPF).
David Taylor, executive director and general counsel at the PPFm said: “We will put in place a special rule recognising the risk profile of schemes which cease to have a substantive sponsoring employer, should that be necessary.
"For that reason alone, the rules published are not absolutely final, but our intention is only to change them in relation to this one area, if at all.
"Accordingly we encourage schemes to act on the levy rules now, for example putting in place and certifying risk reduction measures. This can both improve security for members and help to reduce bills by minimising the risk to the PPF – something we are keen to encourage.”
Also, the PPF confirmed the levy estimate of £615m, originally published in September 2016 and unchanged from 2016 to 2017.
Mr Taylor added the levy remains an important source of funding for the compensation scheme.
He said: “We thank stakeholders for their feedback and conclude that overall the model is working well. While there are some steps that could be taken to improve it further, we believe the appropriate point to review and potentially update aspects of the model is for the next triennium.
"Therefore, consistent with our goal to keep the rules stable over three year periods, we are making only limited changes for 2017/18.”
ruth.gillbe@ft.com
