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Wicks closing the pension loophole

A new package of retrospective measures designed to stop employers sidestepping their pension obligations was unveiled last week by pensions minister Malcolm Wicks.

The new clauses introduced into the Pensions Bill aim to address the risk of employers trying to dump their liabilities on the Pension Protection Fund, which the Department for Work and Pensions says is already happening.

The measures will allow the new pension regulator to require an individual or company to pay into the PPF where they have tried to avoid their pension obligations.

The Government is making the power retrospective back to June 11, 2003 because it says it has identified cases where employers have taken actions to ditch their liabilities on to the PPF.

The DWP says retrospective legislation is justified because when it unveiled these proposals on June 11 it made it clear that anyone trying to get around the new rules would be dealt with. The DWP is relying on a statement at the time which said “we will have to introduce protection against engineering designed to circumvent the intent of our proposals” to justify retrospective action.

The DWP says the new rules will act as a deterrent to employers who are considering dodging their pensions obligations and should reassure responsible employers that their PPF levy payments will not be subsidising unscrupulous employers.

Wicks says: “Mitigating the risks of moral hazard is one of the biggest challenges we face in introducing the Pension Protection Fund. But we are confident that the package we are proposing today will safeguard the integrity and sustainability of the PPF and avoid placing an unfair burden on responsible levy payers.”

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