The U.K.'s Pension Protection Fund began operations today. The agency, which is similar to the PBGC, will guarantee a portion of pension benefits for members of defined benefit plans with insolvent sponsors. The PPF is funded by contributions from plan sponsors, based on the number of plan participants. The agency expects to raise £150 million ($282.2 million) this year, with plan sponsors paying £15 per active and retired member and £5 for each deferred pensioner.
Industry sources expect the PPF to introduce a risk-based levy based on a plan's funding position and asset allocation within the next two years.
The agency, led by Chairman Lawrence Churchill, former chief executive of Zurich Financial Services, will work alongside David Norgrove, the new pension regulator who is former chairman of the trustees for the Marks & Spencer PLC pension plan. Mr. Norgrove's office will enforce the Pension Act, passed late last year, and advise plan sponsors on whether to go ahead with corporate activity such as restructuring that could affect their plans' ability to pay benefits.