The new Pension Protection Fund is likely to have much larger liabilities than was originally calculated but the figure will not be known until November this year.
The Pension Protection Fund has calculated that a liability of £1 trillion would be present if all final salary (or defined benefit) pension schemes failed at the same time.
From April next year all pension schemes will have to pay levies towards the Pension Protection Fund, even if their own pension scheme has a surplus of assets over liabilities.
Our view
There are two sides to the Pension Protection Fund. One is that it will protect employees from losing all of their pension benefits, should their employer's pension scheme fail. However, the other side is that pension schemes with good management and surplus assets will still be expected to pay into the fund. We believe this will push more and more employers to get rid of their final salary pension schemes, in favour of ones that do not place liabilities or financial burdens on the company.