The Pension Protection Fund is well-funded enough to cope with large schemes such as Carillion falling into it without having to raise the 10 per cent cut on people's savings, the chief executive of the Pensions and Lifetime Savings Association has said.
Julian Mund said while the Pension Protection Fund (PPF) would receive a significant new entrant following the failure of construction company Carillion, individuals whose schemes are already in the PPF should not fear a hike on the 10 per cent 'haircut' on their savings as a result.
He said: "My understanding of the PPF funding is that it is secure and solid and healthy so I would not envisage this being an issue on the table.
"When and if problems do arise, this pension lifeboat is here to help provide savers with confidence and assurance they will be getting 90 per cent of what they would be getting previously."
Earlier this month it was announced that Carillion's pensioners will see much of their pension replaced by the PPF, although future increases will be lower.
But those not yet at pension age or who took early retirement may lose at least 10 per cent of their promised pension, with some commentators suggesting they could lose up to 20 per cent.
Some commentators have questioned whether the PPF will need to have better protection in the future, even though the PPF has budgeted for some big schemes to fail.
Communication needs to take place with young people to help them understand what it will mean for them if they do save, and if they don't save. Julian MundFormer pensions minister Baroness Ros Altmann explained: "Currently, the PPF is well funded and can cope with a few large schemes entering.
"However, it is very important for trustees and the Regulator to guard against too many large firms being 'restructured' and weakening the covenant for the pension fund."
This comes as the work and pensions select committee published a set of questions today (19 January) to The Pensions Regulator and the pension scheme trustees on the collapse of Carillion.
In his statement, Frank Field, the committee's chairman, said: "We have some specific concerns on the pensions side. It beggars belief that a company can be allowed to run with such apparent recklessness - and be so lucrative for the directors and shareholders - when it has a giant pension deficit and a mountain of debt.
"I will be proposing we take evidence from the company directors, the trustees, the pensions regulator and the auditors who somehow concluded Carillion was a going concern."
Mr Mund also told FTAdviser he believed greater engagement and better use of technology could help to eradicate pension scams and to encourage more people, particularly the young, to start saving for a pension.
He added: "Embracing technology and doing more with technology to help people interact, and to help people understand what it means when they are putting money into their pensions [will help].
"The incoming pensions dashboard is a solution that will help. Education is another piece. Communication needs to take place with young people to help them understand what it will mean for them if they do save, and if they don't save. What is the outcome, what will that look like?
"We are fully supportive of [financial education] and have been doing work to help inform and lead the debate around helping young people."
Hitting the Target, a recent consultation issued by the PLSA, aims to help provide clarity for young people over what they might need to invest in order to meet their expectations in retirement. Mr Mund said the PLSA would be building on this research and doing more work around engagement and education during 2018.
On the question of auto-enrolment contribution rates rising this year to 5 per cent and to 8 per cent next year, Mr Mund said he was confident that opt-out rates would not rise as people start having to put aside more of their salary each month into a workplace pension, although he added even 8 per cent was not enough.
Mr Mund commented: "I am hopeful we won't see an increase in opt-out rates [as contributions rise]. But let us take one step at a time. First of all, we got auto-enrolment introduced and 9 million people are now starting to save for a pension.
"Let's embed this and get people taking contributions up to 5 per cent, then 8 per cent, and then build on that. Yes, people will need to contribute more than 8 per cent if they are to have a good income when it comes to retirement, but let's take it step by step."
Recent research by the PLSA suggested 12 per cent was a good amount that people should be putting into pensions, and Mr Mund stated the PLSA would work to help people get towards this higher mark in the 2020s.
simoney.kyriakou@ft.com
