Once, Steve Hall could have looked forward to a prosperous retirement thanks to his company's pension scheme. But now he is facing financial uncertainty.
The PPF seeks to help workers who could lose their pensions
"The worst case scenario is I could lose probably 30 to 40% of my pension - it's not just me as it must be 200 to 300 people that have an interest in the pension scheme that are going to have their futures affected," he told BBC File on 4.
Eight months ago the Worcester-based company he worked for, which was owned by former Tory cabinet minister Stephen Dorrell MP and made work wear, went into so-called pre-pack administration.
The assets were sold to a new business trading under a new name but without the pension liability of the old business.
Instead of drawing his planned pension, Steve Hall and others in the scheme will have to rely on the government's Pension Protection Fund (PPF), which was set up to ensure pensioners were not left high and dry when their former employers went bust.
The PPF is funded by levies on company pension schemes.
Most employees will receive 90% of what they are owed. But as a high earner Mr Hall said he would get less because payments are capped.
"All the pensioners are still in limbo as to what their pensions will be in the future, it just seems totally wrong," he said.
Mr Dorrell took his and his wife's pension out of the scheme before the company closed, in an attempt to reduce its liabilities.
He now has shares in the new company plus a director's salary in addition to his Westminster pension.
"My wife and I would have been better off if we had stayed in the fund and ended up in the PPF," said Mr Dorrell, who added that his family had lost the £500,000 it invested during 2007 to try and save the business.
He told File on 4 that administration had been a bitter pill to swallow for both his employees and himself but it had saved 400 jobs.
There is no suggestion that the pre-pack deal was illegal - the Pensions Regulator approved the scheme's admission to PPF.
But it has left a bad aftertaste for employees such as Steve Hall.
"Pre-pack is so easily arranged you can in a single day effectively remove a company's assets and leave the creditors and indeed the pension scheme out on a limb," he says.
"Immoral is perhaps too-strong a word but that's how I feel, it cannot be right that you can so easily rid yourself of liabilities."
David Blake, director of the Cass Business School in London, also believes pre-pack administrations are being used to dump costly pension fund liabilities.
Under pre-pack adminstration the company's assets are sold immediately after it has entered administration and often the previous previous directors or management buy the assets from the administrator to set up a new company.
It has the advantage of enabling any profitable parts of a business to be salvaged quickly but Mr Blake believes it can also be used to exploit the PPF.
"The pension liabilities and assets [of a company] go into the Pensions Protection Fund and then that company restarts under a different name and then finds itself doing business a few weeks later with its pensions liabilities off the books," he told File on 4.
"It's obviously legal, because it has been accepted by the regulator, but whether it's moral or fair on everyone else is a different matter."
The Pensions Regulator brief includes ensuring that companies do not place unfair burdens on the fund.
David Norgrove, its chair, defended the regulator's record.
"There are cases where companies set out deliberately to avoid their pension liabilities and we do have powers to prevent those, and I think we have been pretty successful at that," he said.
Mr Norgrove added that pre-pack deals were "particularly difficult cases and it is our role to act as a creditor with the PPF to make sure that the company really is inevitably going into insolvency and that the pension scheme is treated fairly in the restructuring".
More than 30,000 people rely on PPF, but six times this number are waiting for their scheme to be accepted into the fund, which has a £1.2bn deficit.
David Norgrove said he was confident that the PPF could "continue to meet the claims on it".
He said fears that the fund might become insolvent were "greatly exaggerated".
However David Blake said the taxpayer could have to bail out the PPF.
"The fund will have a reducing fund of good schemes to charge levies to and an increasing pool of weak scheme it can't charge a fair levy on," he said.
"These trends will lead to increasing deficits in the Pension Protection Fund."
File on 4 is broadcast on BBC Radio 4 on Tuesday, 9 March 2010, at 2000 GMT, repeated Sunday, 14 March, at 1700 GMT. You can listen via the BBC
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