{"id":6510,"date":"2020-09-16T07:00:24","date_gmt":"2020-09-15T23:00:24","guid":{"rendered":"https:\/\/www.infinitysolutions.com\/?p=6510"},"modified":"2020-09-15T15:05:42","modified_gmt":"2020-09-15T07:05:42","slug":"workplace-pensions-are-at-risk-and-so-is-the-uk-s-lifeboat-fund","status":"publish","type":"post","link":"https:\/\/www.infinitysolutions.com\/blog\/workplace-pensions-are-at-risk-and-so-is-the-uk-s-lifeboat-fund\/","title":{"rendered":"Workplace Pensions Are At Risk\u2026 And So Is The Uk\u2019s Lifeboat Fund"},"content":{"rendered":"<p>Former UK pensions minister Steve Webb, who made <a href=\"https:\/\/www.theguardian.com\/money\/2014\/mar\/20\/pension-pots-used-lamborghinis-minister\">headlines<\/a> back in 2014 when pension freedoms were introduced by suggesting that it was ok for pensioners to blow their pensions on a Lamborghini, has issued a warning about the fragility of the UK\u2019s<strong> Pension Protection Fund<\/strong>.<\/p>\n<p>The <strong><a href=\"https:\/\/www.ppf.co.uk\/\">Pension Protection Fund<\/a><\/strong> is frequently described as a \u2018lifeboat\u2019 for collapsed pension schemes. It was set up to protect the millions of people with a defined benefit pension scheme. In the event that their employer becomes insolvent, the <strong>PPF<\/strong> continues to pay their pension. The fund is financed by an annual levy paid by employers and manages \u00a332billion of assets for its 249,000 members. Notable companies whose former employees have had to rely on the <strong>PPF<\/strong> include Carillion and Kodak.<\/p>\n<p>Now Webb is warning that Covid-19, responsible for so much emotional and financial upheaval this year, could tip the <strong>PPF<\/strong> over the edge. The alarming number of companies collapsing as a result of the virus, some of them with significant pension liabilities, could eat up the scheme\u2019s surplus funds and require \u2018extreme measures\u2019 to be taken. The first of these would be to increase the levy on existing employers, many of whom are already struggling to cope financially.<\/p>\n<p>One example is the <a href=\"https:\/\/www.aop.org.uk\/ot\/industry\/eyewear-and-lenses\/2020\/07\/06\/norville-group-enters-into-administration\">Norville Group<\/a>, which went into administration in July 2020 as a result of the <strong>PPF<\/strong> levy eating into profits, weakening the balance sheet and triggering a cash flow crisis.<\/p>\n<p>Webb left his government post in 2015 and now works as a consultant for actuary firm <a href=\"https:\/\/www.lcp.uk.com\/media-centre\/2020\/01\/former-pensions-minister-sir-steve-webb-to-join-lcp\/\">LCP<\/a>. In that role he has looked at the danger a Covid-19 recession would pose to the <strong>PPF<\/strong>. He has modelled two different scenarios, involving hits of \u00a310bn and \u00a320bn to the fund, and concluded that the fund could absorb the lower amount but could only survive the latter by raising levies. He also warned that even \u00a320bn could be a conservative estimate depending on the number of larger employers who will face insolvency over the next few years.<\/p>\n<p>If a worse-case scenario develops and the fund is required to take a hit of over \u00a320bn, the fund may have no option but to reduce payouts to existing pensioners to 90% of their current level, a move that would require the approval of parliament. Webb stressed that this would be a last resort.<\/p>\n<p>While Mr Webb\u2019s assessment makes for grim reading for those relying on the <strong>PPF<\/strong>, the fund\u2019s Executive Director, David Taylor, sought to reassure members saying \u2018Our members, levy payers and those protected by the <strong>PPF<\/strong> should not be concerned with speculation about our ability to weather the current economic situation. Our latest modelling shows that we are well-placed to achieve our self-sufficiency target, and our 2020-21 levy estimate remains unchanged from its announcement last year.\u2019<\/p>\n<p>Final salary-style company pensions schemes have always been viewed as the gold standard of pensions but in these uncertain times nothing is sacred. This vulnerability highlights the importance of contingency planning for your own retirement with back up options and a healthy nest egg.<\/p>\n<p>If you have any worries and concerns over a final salary pension scheme, I\u2019d be happy to look at your financial situation and suggest how you can diversify your savings and investments so that you don\u2019t have all your eggs in one basket.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Former UK pensions minister Steve Webb, who made headlines back in 2014 when pension freedoms were introduced by suggesting that it was ok for pensioners to blow their pensions on a Lamborghini, has issued a warning about the fragility of the UK\u2019s Pension Protection Fund. The Pension Protection Fund is frequently described as a \u2018lifeboat\u2019&hellip;<\/p>\n","protected":false},"author":2,"featured_media":6526,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false},"categories":[2,153,66],"tags":[],"class_list":["post-6510","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retirement-planning-pensions-transfers","category-blog","category-viewpoint","category-2","category-153","category-66","description-off"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Workplace Pensions Are At Risk\u2026 And So Is The Uk\u2019s Lifeboat Fund<\/title>\n<meta name=\"description\" content=\"The Pension Protection Fund is frequently described as a \u2018lifeboat\u2019 for collapsed pension schemes. 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