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UK: 'Safety net' urged for final salary
By Florien Gimbel
The UK's top pension
fund representative is to call on the government to create a national
compensation scheme, or "safety net", for members of final
salary pension plans.
In an interview with
FTfm, Terry Faulkner, chairman-elect of the National Association of
Pension Funds, said the government should "think very seriously"
about member protection. "With 23m people covered by final salary
plans, it's a matter of great public interest."
On Saturday, the
Financial Times disclosed that ministers were considering proposals to
require company pension documents to carry health warnings, telling
members when there was not enough in their schemes.
Only last week, 150
staff at Blyth & Blyth, a Scottish engineering firm, were told they
had lost their pensions. This followed the collapse last year of ASW, a
steel company, where workers lost most of their pension benefits.
downturn - plus the new FRS17 accounting standard that obliges companies
to register the market value of a pension fund's assets and liabilities -
has plunged many pension funds into deficit.
Countries such as
the US and Germany already have national "discontinuance"
schemes, which are largely funded by levies on pension funds. Mr Faulkner
said the British government had shied away from the idea of a safety net,
because it did not want to become "the insurer of last resort".
"If you are in a defined contribution plan, your savings
go up and down with the market, but you can insure against that through
asset allocation. In a final salary plan individuals cannot insure against
the real risk - the insolvency of their employer."