Despite the trouble economy the Pension Protection Fund has said that it has come through without too many problems. The PPF is also responsible for overseeing the Financial Assistance Scheme. This is good news for many people especially the members of pension schemes. It is also good for the independent trustees who have the responsibility of doing FAS assessment and PPF assessment.
Alan Rubenstein is the head of the PPF and he has said, “the PPF has come through the troubled times of the last few years quite well and have taken no major damage.” Figures published for the 09/10 year show that the Fund has a surplus of over £400 million. This is due to good investments as well as a reduction in the number of claims being made. It is expected that the latest figures for last year are expected to show that there are further improvements in the fund.
Mr Rubenstein went onto say, “We have seen a great many troubles across the whole economy in the past two years and these troubles have affected every industry, including that of pensions. Fortunately we have done relatively well and seemed to have weathered the storm that has been battering the country financially.”
Mr Rubenstein sounded a note of caution; however, warning the PPF’s strong funding position was not something that could be taken for granted.
He said, “In an ever changing world, we need to understand our risks and plan our future funding, so that we can give everyone – members, levy payers and government – confidence that we will be around to pay the vital compensation we provide, not just for next year, or even the next ten years, but as long as we are needed.
That is why the funding strategy that we published last year is so important. This strategy charts a course over the next 19 years, as the risks we face evolve, toward a future in which the PPF can expect to be self-sufficient. That will mean a future in which the levy ceases to be a significant source of income for the fund, with our success or failure increasingly depending on our ability to manage our investments and risks together.”
In the meantime, said Mr Rubenstein, the levy would continue to be an important component of PPF resources. It was right that the way it was raised should be consistent with the PPF’s approach to its funding strategy. However, the design of the levy also needed to be a better match with the expectations of stakeholders.
Mr Rubenstein added, “Our changes to the levy from 2012/13 aim to combine these two requirements and the responses that we received to our consultation on our proposals indicated we were on the right track. There was strong support for the broad thrust of our proposals, with stakeholders viewing them as a significant improvement on the current levy framework.
A key change from 2012/13 will be that we will aim to set the rules for the levy for a three year period, rather than changing the way the levy is calculated every year. A scheme’s levy will still vary depending on movements in its risk, which is appropriate, although we are also making changes to smooth the assessment of risks which should help make bills more stable and predictable. Together with the stronger emphasis on scheme funding in the new formula, we believe this gives schemes more control over the levers that influence their levy.”
The PPF raises some of its funding through the pension protection levy. The levy helps towards the compensation payable to members of schemes that transfer to the PPF. All UK defined benefit (final salary) pension schemes eligible for PPF compensation pay the pension protection levy.