LONDON — Nearly 10 years ago, the idea of replicating America's Pension Benefit Guaranty Corp. was derided as flawed and was quickly discarded.
This month, Prime Minister Tony Blair's Labor government announced it will start a pension insurance fund modeled on the PBGC, a quasi-governmental agency created 30 years ago.
Andrew Smith, secretary of state for work and pensions, announced on June 11 a series of reforms that includes the establishment of a Pension Protection Fund, financed by a flat tax on all U.K. pension plans.
Also included in the announcement were plans to alter Britain's minimum funding requirement laws to scheme-specific arrangements, whereby funding levels are established by the scheme in consultation with the regulator and determined by factors such as asset allocation and membership profile.
While the Pension Protection Fund proposal has some supporters, it has some powerful opposition, led by the Association of British Insurers, London. ABI officials say the government's proposal, first suggested in December, won't necessarily protect workers' pension benefits.
"Clearly there have been problems with the American system. It is underfunded in this economic environment, and careful thought needs to go into how the British scheme is funded," said ABI spokeswoman Emma Grainge. The PBGC's deficit has grown to about $5.4 billion, according to Executive Director Steven A. Kandarian, largely because of the failure of airlines (Pensions & Investments, May 12).