Move to ease fears over pensions

MINISTERS moved to reassure business today over the cost of a fund to protect 10m workers from the risk of losing their pensions.

Work and Pensions Secretary Andrew Smith said payments into the fund would be 'risk-related' so that responsible firms pay less.

He was unveiling the Government's Pensions Bill, which will create a pension protection fund in a bid to prevent episodes like the Robert Maxwell scandal, when thousands lost their savings.

All companies will be forced to pay into the fund. It will bail out pension schemes at firms which go bust.

Business leaders and experts had protested that flat-rate payments would penalise the best-run firms and encourage them to take risks with their pension schemes.

Smith said that from year two of the fund's operation, all companies with occupational pension schemes would pay a levy based on their credit rating, the level of funding in the schemes, and the way the schemes' assets were invested.

In the first year, all firms would pay a 'reduced flat fee' while the risk-related element was calculated.

Smith called the proposals 'a big step forward for strengthening pension protection'.

However, the fund will not help an estimated 60,000 people who have already lost their pension savings when their employer went out of business.