You Read It Here First

For years Britain's occupational pensions were the envy of Europe, but they have been made uneconomic by Brown's tax, increased longevity and the stock market collapse. The pensions holidays taken by employers, many of whom are still not contributing even now, haven't helped either. (Of course they should have built up surpluses to protect funds against a rainy day - but a bit of Tory legislative wizardry in the 1980s made it uneconomical to do so. Thanks, Nige.)

So what is the Government's response ? In case funds go broke, they'll set up a special pot of cash which can bail out the poor pensioners. Brilliant idea ! And where will the cash come from ? From a charge on the pension funds ! And if more funds fail as a result of the charge ? - presumably increase the levy on the funds which still have cash !

It's possible to imagine a pyramid-style scenario in which one fund after another collapses, increasing the levy on those left, until at last the best-run and most prudent funds, milked by levies to compensate other pensioners, finally go under - leaving their pensioners uncompensated.

- this blog, July 2003. It transpired that the charge was to be levied not on the pension funds themselves, but on companies with final salary pension schemes. So the effects are slightly different - the companies close their schemes. The principle seems to be standing up well though.

Fresh doubts surfaced yesterday over the viability of the Government’s pensions lifeboat, after the fund received its second cash call in a fortnight and an influential ratings agency predicted that it would collapse under liabilities of almost £900 million a year.
Standard & Poor’s (S&P) said that the Pension Protection Fund (PPF) would quickly rack up its own deficit, forcing it to raise its annual levy on companies with final-salary pension schemes. “There’s a limit to the losses the PPF can shoulder without additional funding,” Jim MacLachlan, a director at S&P, said.

The CBI said that businesses would be infuriated by the prospect of having to pay even more than the annual £300 million that they have been told to contribute to the PPF from 2006.
Susan Anderson, at the CBI, said that increases to the levy would force more companies with final-salary schemes to close them. “It will come to a point where they’re killing the goose that laid the golden egg,” she said.

- The Times, April 2005.