Pensions move set to spark outrage

THE Government wants to shift responsibility for the rescue of pension funds of insolvent companies from itself to the private sector.

This could mean that companies with healthy pension funds will be required to pick up the pieces of insolvent firms such as asbestos group Turner & Newall where the potential liabilities are estimated by experts at £200m to £300m.

The Government's reversal on already insolvent pension funds was revealed by Pensions Minister Malcolm Wicks. He said companies that are already insolvent 'may still be able to receive Pensions Protection Fund compensation'.

The change in tack by the Government, outlined in a written answer, is certain to cause outrage among employers running healthy final salary pension schemes. They are now being asked to pick up the tab retrospectively for firms already in financial difficulty.

Actuaries Lane & Peacock estimate that proposed changes in pension law, including the establishment of the Pensions Protection Fund, could increase the deficits of the FTSE 100 companies to £125bn.

The burden of the new insolvency requirement will largely fall on those companies struggling to keep final salary pensions schemes operating. It will be harmful to established companies such as BA and BAE Systems.