Pensions levy needs to be responsive to economic conditions
The levy raised by the Pension Protection Fund (PPF) in order to safeguard the savings of pension scheme members is running the risk of hampering the economic recovery.
The claim came as the PPF begins debating the future of the levy, which is charged on defined benefit pension schemes in order to protect the retirement savings of employees whose firms collapse or fail.
The British Chambers of Commerce (BCC) said that the original level of the levy was set at £300 million per year.
However, that figure climbed to £675 million in 2007/8, and now stands at £700 million.
As a result, the BCC argued, many firms are finding the levy too punishing a cost, especially during an economic downturn.
This means there is now a real danger that defined benefit schemes could close at an even quicker rate.
The BCC wants the levy for 2010/2011 to be suspended immediately, with wholesale reforms in the medium to long-term.
David Frost, the director general of the BCC, commented: “We are deeply concerned by reports of large and unexpected increases in the PPF levy, which threatens to undermine the viability of many businesses. There is a risk that with DB schemes closing fast, the pensions gap that already exists between the private and public sectors will be even greater.”
Mr Frost added that the levy needs to be responsive to the economic situation.
He said: “We cannot lose productive businesses offering good retirement benefits because of this levy. This could hamper the private sector’s ability to drive the UK out of recession and into a sustainable recovery.”