New plea over top-up rules

FEARS that a growing number of leading companies cannot afford to top up their pension schemes to legally binding minimum levels have triggered calls for the rules to be suspended to stave off financial crisis.

The National Association of Pension Funds has warned its members that it has 'been made aware that a number of companies are facing significant increases in scheme contribution rates to satisfy the minimum funding requirement'.

This is the level of funding that the Government judges necessary for a pension fund to meet its commitments.

The stock market fall over the past 18 months means that many pension funds, most of which still have 70% of their assets in shares, have suffered a huge fall in value. And under the rules, companies must make up the shortfall over a fixed period.

Research by Financial Mail in September revealed that many firms faced having to inject a combined total of £12 billion into their pension funds to repair the damage inflicted by the share-price fall.

But many fear that they will not have enough cash to restore the value of their schemes within the required time and they are calling on the industry watchdog, the Occupational Pensions Regulatory Authority, to extend the deadline.

Individual companies may apply for such a breather. But the process is stringent and can take months, so NAPF plans to seek a blanket exemption.

Opra can grant an extension in 'exceptional circumstances' and NAPF argues that events, exacerbated by the September 11 attack, fall into this category.

Without relief, some companies, such as the troubled Marconi, could face disaster, and others may have to cut dividends to make pensions top-ups.

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