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CBI chief calls for urgent action to prevent pension costs harming UK growth prospects
The CBI today called on the Government to prevent soaring pension costs harming businesses’ ability to invest and create jobs. It urged action to address both artificially high deficit figures, driven by low gilt yields, and a potentially significant hike in the cost of the Pension Protection Fund (PPF) to businesses.
The Bank of England’s necessary Quantitative Easing (QE) programme and the relative attraction of UK Government debt over that of some Eurozone countries have driven down gilt yields. As gilt yields are used in valuing the likely cost of future pensions, this has pushed deficits up, even though there has been absolutely no change in the underlying funding position.
At the same time, companies’ PPF levies could rise by up to 25% next year. This would be a potential “double whammy” for businesses running defined benefit pensions, who already contribute £36bn a year to these schemes.
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