Four leading actuaries have written to the Government setting out serious concerns about its new pensions safety net for workers.

The heads of the Institute of Actuaries and the Faculty of Actuaries have sent a letter to Work and Pensions Secretary Andrew Smith expressing their worries about the way the pension protection fund (PPF) will be run.

The PPF, which is being introduced in 2005, will ensure people who contribute to a company pension scheme do not lose their savings if their firm goes under.

But the actuaries warned if the PPF was operated like a pension fund, it would be subject to the same risks of failure.

If this was the case it was essential the public was clearly informed at the outset the fund would not provide guaranteed benefits.

The letter continues: "We noted you described the PPF, more than once, as an 'insurance fund'. We also noted, in the second reading debate, the minister for pensions referred to the PPF as honouring pension promises.

"If these are the Government's objectives, then the PPF must be set up and operated like an insurance company, subject to full insurance supervision and solvency regulations."

The letter was signed by Jeremy Goford, president of the Institute of Actuaries, Michael Pomery, president-elect of the same group, Tom Ross, president of the Faculty of Actuaries, and Harvie Brown, the group's vice-president.

The PPF will be funded through a levy on companies that offer final salary pension schemes.

It will pay out up to 90 per cent of the benefits accrued by people who have yet to retire and 100 per cent for those who already have if their firm goes bankrupt.

Wednesday March 24, 2004