A Conservative government would not underpin the financial liabilities of the Pension Protection Fund (PPF) according to the shadow pensions minister Nigel Waterson. While this headline will make uncomfortable reading for many in the UK who are concerned about their employer pension scheme, there is a reason why the authorities would not automatically underpin compensation payments funded by the PPF.

As experts predict a massive increase in compensation liabilities for the PPF the Conservative party has suggested that a cast iron pledge to underpin the financial liabilities of the PPF may result in a "more lax environment within the pension arena". In simple terms, the Conservative party believes that with a cast-iron pledge that taxpayers would cover any shortfall in the pension arena this could give trustees an excuse to take undue risks.

Whether or not trustees would put themselves in a position whereby a fund was seen to be taking "undue risks" is another matter but the idea that the taxpayer would pick up ALL compensation liabilities in the future is one which could turn out to be very expensive - if such a pledge was put in place. There is enough pressure on the state benefits system without adding more potential liabilities, the total of which would never be quantifiable.

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