The four most senior actuaries in the country have written to the Secretary of State for Work & Pensions spelling out their serious concerns about the future operation of the Pension Protection Fund (PPF).

The four senior actuaries, Jeremy Goford, Tom Ross, Michael Pomery and Harvie Brown, say it is not clear whether the PPF will operate like a pension fund or like an insurance fund.

The outline in the Pensions Bill suggests that the PPF will operate like a pension fund. As such say the actuaries, the PPF will be subject to the same risks of failure as those which have given rise to the need for the PPF in the first place.

If this is the case, say the four, the public should be made aware that government does not intend to “guarantee” the PPF benefits.

The PPF has an important role to play in helping rebuild public confidence in retirement saving, say the four, and argue the government must make clear what their objectives are.

The actuaries note that it would be tempting for the government to run the PPF like a pension fund as this would keep down the size of the initial levy. This is risky to members’ benefits. If the PPF were run according to a strictly matched investment policy investing in bonds and with capital reserve to meet solvency requirements, there would be implications for the levy.

• The government should:
  Be entirely open and honest with the public about the uncertain future for benefits covered by the PPF; or
• Operate the PPF like an insurance fund, applying insurance company solvency regulations.

Jeremy Goford is President, Institute of Actuaries. Tom Ross is President, Faculty of Actuaries, while Michael Pomery is President-elect, Institute of Actuaries and Harvie Brown is Vice-President, Faculty of Actuaries.