Pension experts have revealed that the scheme set up to protect final salary pensions could be in trouble.

With the recent increase in pension shortfalls, the Pension Protection Fund (PPF) is in danger of being submerged from high volumes of claims being made as a result of the credit crunch.

According to the findings, up to 91% of final salary schemes can’t afford to pay out benefits, with the under-funded schemes carrying deficits of more than £228 billion.

The PPF takes around £700 million from companies every year, but this has proved too little and doesn’t cover its liabilities. The PPF has a deficit of around £550 million.

The PPF has already carried the weight of 62 schemes that failed, which include Woolworths, and Lehman Brothers.

There are now growing concerns that further failed schemes will result in the PPF to collapse, leaving future companies at risk of bankruptcy vulnerable to loss of employee pensions.

The government has been called on by The National Association of Pension Funds to back the scheme and act as a safety net, but the government has yet to comment.

NAPF Chief Executive, Joanne Segars, said: “In these exceptional times, maintaining confidence and security in pensions is vital so it would be a sensible measure for the Government to be the ultimate guarantor of the Pension Protection Fund.”

Treasury spokesman for the Party Vince Cable, said: “I get a very strong sense that this is the Titanic hitting the iceberg. It is potentially very vulnerable in a serious recession, which is what we are now getting into. Companies won’t be able to sustain the fund in its present form. The Government has to be explicit that it is standing behind it.”

According to the survey, which was carried out by Punter Southall – an administration service provider specialising in pensions, 60% of pension schemes are currently unaware how their funding is, and is due to be affected by the on-going recession.

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