Pension Protection Fund (Hansard, 11 November 2003)

§ The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham)

Andrew Smith announced on 11 June that the Government will introduce a pension protection fund which will increase protection for employees who lose their pension savings due to employers' insolvency. The PPF will ensure that scheme members whose companies become insolvent after implementation can still count on receiving a substantial proportion of their pension and therefore have the secure retirement they were expecting.

The Government are also committed to amending the priority order so that when pension schemes are wound up in future, those members who have been in the scheme the longest, but have not yet retired, are more likely to receive the pension they were expecting. Draft regulations were published on 22 October 2003, which opened a six-week consultation period, ending on 3 December 2003.

However, it is the general principle of good legislation that it does not apply until it comes into force. Promising compensation for members whose companies go bust before the introduction of the protection measures would mean taking on unknown—and potentially very large—liabilities. With the prospect of guaranteed compensation, some employers might seek to abandon their pension liabilities, potentially further increasing the cost. This would be a potentially very large burden to place on the general taxpayer or any alternative source of funding.

Member protection is a government priority, and so these new protection measures will be introduced as soon as possible after the relevant legislation is in place.