The introduction of a flat-rate levy on businesses to fund the UK pension protection scheme should be avoided, according to a former chair of the National Association of Pension Funds.

Government plans for the fund, which would protect the pensions of workers whose firm goes bust, are to be outlined this week.

However, speaking on BBC Radio Four’s ‘Today’ programme, Peter Thompson said that the introduction of a risk element into the premium was important.

“Having a flat rate premium is like being told that your motor insurance is £500, and it doesn’t matter what sort of car you are driving or what your record is like.”

As part of its overall package of pension reforms, the UK government mooted plans last week to make employees automatically join company pension schemes unless they state otherwise.