MANY workers depend on their employers for their retirement income. But, for defined-benefit schemes, this is an explicit bet that their employer will still be around several decades later: quite a gamble. So governments in Britain and America have set up insurance schemes designed to protect workers against the risk that their companies go bust. These bodies, Britain’s Pension Protection Fund (PPF) and America’s Pension Benefit Guaranty Corporation (PBGC), are funded by levies on employers.
Now that Tata Steel’s loss-making British operations are up for sale, the chances are that the company’s pension fund will end up in the PPF’s clutches before too long. Buyers are likely to cherry-pick the steel company’s assets, which may leave the scheme without a viable sponsor—contributions into the fund were £155m ($219m) in the most recent financial year. And because the scheme is a legacy of the old nationalised British Steel, it is huge, relative to the existing business: its assets are almost £14 billion compared with annual turnover of just £8.1 billion at Tata Steel’s European operations.
Fortunately, the...Continue reading
Source: Business and finance http://ift.tt/23l45yD
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