NAPF warns of pension bill ?seismic shock?

Many more final salary pensions could close and more modern forms of pension provision could be ?killed off? by the government?s pension bill, the National Association of Pension Funds warned on Monday.

?I do not think this is what the government intends, but it could well be the unintended consequence of the bill,? said Christine Farnish, the chief executive of the NAPF. Such an outcome would also ?seriously disrupt? UK investment markets.

In a letter to Andrew Smith, work and pensions secretary, and Gordon Brown, the chancellor, Ms Farnish warns that the planned pension protection fund and some proposed technical changes to pension funding could ?deliver a seismic shock to an already fragile defined benefit sector, or kill more modern, affordable forms of defined benefit at birth?.

The risks arise, she writes, because the bill will force trustees, actuaries and the new pensions regulator to take a cautious view of whether a scheme is adequately funded. In line with the European Union?s pension directive, funds must have ?sufficient and appropriate assets?.

The NAPF suggests a clutch of solutions, including making the PPF less generous; being clear that fund deficits can be put right over a long period; allowing solvent employers to honour pension promises when they fall due, rather than having to buy out the full benefits at once; and making it easier to modify schemes.