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Pension protection fund under pressure

The UK government is under serious pressure to make large-scale changes to the U.K.'s pension protection fund which has revealed a deficit of £1.23 billion for the current year. This is a massive increase on the £517 million deficit last year and calls into account the way the system has been set up and whether it is a long-term viable option for the UK government and UK regulators.

In simple terms the pension protection fund is there as a lifeboat for those members of pension funds which have failed and are unable to pay their ongoing liabilities. The scheme is funded by a levy on UK companies which equates to £600 million a year but which is now falling far short of the requirements. Despite the fact that the managers of the pension protection fund posted investment returns of 13.4% on invested assets last year they were still hundreds of millions of pounds short of their liabilities.

This year alone we have seen 113 new claims concerning pension schemes with a combined deficit of £1.3 billion. It is not rocket science to see that the scheme requires government funding in the future or at least an increase in the levy charged to companies. However, there are fears that more pension schemes are under pressure and the deficit will continue to grow for the foreseeable future.

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