Katja Hall, CBI Director of Employment, said: “The increase in pensions liabilities this month reflects the current volatility in financial markets.
“The Government and the Pensions Regulator must allow firms to take a long-term approach. If they do not do this, firms could be forced to make large contributions to their pension schemes when they can least afford them. This would not be in the interests of pension funds, companies, the economy or the Government.
“We risk unintended consequences if we do not allow a long-term approach that lets companies fund their pension schemes over time.”
The CBI is calling for:
- the Pensions Regulator to approve longer recovery plans as the best way of keeping businesses viable and complying with its statutory duty to protect the PPF.
- the Government to amend rules that make it harder for firms with defined benefit schemes to adapt to the recession. The Section 75 rules on employer debt during restructuring are an example of this – we encourage the government to press ahead with reform.
- investors to resist using a spot valuation and to take a longer-term approach which recognises that the underlying funding position of pensions schemes is strong, and that deficits will be made up over time.
- trustees to allow companies to manage payments over the economic cycle by agreeing longer recovery plans.
- the PPF to resist increasing contributions to the fund, which guarantees the defined benefit pensions of insolvent companies. Businesses are already paying well over double the original estimate (£700m per annum as opposed to £300m).
