MARKETPLACE: Equity falls may ruin PPF.(Financial Times 16 May)

The new Pensions Protection Fund faces a lethal combination of rising claims and weak sponsors if there is a sustained decline in equity markets, says David McCarthy of the Tanaka Business School, Imperial College.

Professor Anthony Neuberger of Warwick Business School and McCarthy reckon that in a worst-case scenario claims on the PPF would rise to 30 times the average.

To cover such liabilities, the PPF would need reserves in place worth 24 years of average contributions.

"It's a horrible claims profile," Mr Neuberger told the National Association of Pension Funds conference in Manchester last week.

Mr Neuberger and Mr McCarthy contend that the PPF could enjoy long periods of calm when it deals with only small claims. But when equity markets suffer long periods of depreciation, sponsoring companies would be weaker