Rover pensions protected by new measures

The pensions of thousands of workers facing redundancy at car giant MG Rover will be protected thanks to new measures which only came into force on Wednesday, experts said today.

If the firm goes into receivership, employees will still end up getting less on retirement, but the blow of a possible pension fund shortfall would be softened by the Pension Protection Fund (PPF).

Reports have suggested there could be a deficit of up to £400m (€583m) in the scheme, a claim Rover has strongly denied.

The PPF protects workers in company pension schemes by paying compensation if their employer becomes insolvent and the pension scheme is sufficiently underfunded.

Mass job losses among Rover’s 6,000 workers at Longbridge, Birmingham, are threatened by the dramatic collapse of a proposed partnership deal with the Shanghai Automotive Industry Corporation.

Administrators have been called in at the firm.

Terry Faulkner, chairman of the National Association of Pension Funds, said: “There’s some comfort for the workers in that at least a safety net level of benefits will be paid to them through the PPF if the assets of the pension plan are insufficient.

“But there might be a big difference between what they expected and what that provides.

“Everybody will lose out to some extent.”

Those already taking their pension who are over the scheme’s retirement age would have their pensions fully protected, but they will miss out on increases in the future, Mr Faulkner said.

Workers who have already retired but are below the given age would receive 90% of their current pensions, or a maximum of £25,000 a year.

Those who are still working would receive the same deal on their retirement.

The PPF protects members of certain defined benefit schemes and hybrid schemes, and is funded through charging compulsory levies on the trustees and managers of the pension schemes.