300 retirement funds in danger of collapse, warns watchdog

Up to 300 occupational schemes are at risk of collapse and need to be monitored closely, the Pensions Regulator said yesterday. More than 400 employers have reported that their staff retirement funds are badly run or at risk of collapse, it said, giving rise to concerns that the number of firms calling on the new Pension Protection Fund (PPF) is set to rise sharply.

The watchdog said the number of firms in breach of basic governance rules reached 450 last year. Officials said it was obvious from the number of breaches of governance codes "that standards are below what is needed".

The PPF, which will take on the deficits of collapsed company schemes, wants to raise £575m to cover the cost of running schemes of companies that go bust. There is concern the fund will be overwhelmed if the number of firms heading into receivership grows and a large number of schemes call on the PPF to bail them out.

Officials at the pensions regulator said its three-year strategy review published today will confirm that protecting the PPF is a key priority alongside protecting the benefits of workers in final salary schemes. The watchdog said: "Our priority is that agreements do enough to protect members' benefits and the Pension Protection Fund, while taking account of affordability constraints."

The regulator's review of its priorities will be examined carefully by unions and employers to detect whether the regulator is likely take a hard line on schemes with large deficits. But a review of scheme funding requirements is not due to appear until next week. It will give details of "trigger points" that will provoke full scale investigations by the regulator.

Employers are expected to make extra contributions to their occupational funds to wipe out deficits within 10 years. Fears that some companies will demand a more lenient approach from the regulator were heightened yesterday when it emerged that the watchdog will allow the Kvaerner pension fund, which has retirement liabilities of £252m, to sever responsibility for its fund in return for a fixed payment of £100m.