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Employers may need to pay more to safeguard pensions after the recession

Plans have been mooted to raise the amounts that employers pay to protect company pension funds during periods of economic growth in order to balance a fall in the sums they pay during bad times.

The Pension Protection Fund (PPF) provides compensation for employees whose pensions are threatened when the business for which they work fails.

The safety net fund is financed through a levy paid by employers that run defined benefit pension schemes.

The PPF has pledged to maintain the levy at a steady level in real terms until 2010/11, increasing it only to keep pace with wage inflation.

Last year the fund received £675 million from employers, rising to £700 million this year in line with the 3.6 per cent jump in average earnings.

However, the PPF’s new chief executive, Alan Rubenstein has suggested that employers may be charged a higher levy in good economic times so that payments can be cut during difficult periods.

Mr Rubenstein said: “There is a thought that we should be much more counter-cyclical than we are now. If so, we would hold the levy – even in nominal terms – but raise it by more than the rate of inflation in future years.”

Although the idea has been floated, Mr Rubenstein added that the issue was still being discussed at the PPF and that it would need the approval of the full board.