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NAPF calls on Govt to prop up the PPF

The National Association of Pension Funds has called on the Government to guarantee any levy above the current £675m falling on the remaining final salary schemes.

In its response the PPF’s consultation on the annual levy, the NAPF says, given the difficult economic environment, the Government should “explicitly guarantee that it will meet, or at least assume responsibility for, any rises in the aggregate annual levy”.

It has also hit out at the long-term insolvency risk which it says is based on very extreme economic conditions. The NAPF says for the majority of schemes, the long-term measure should instead be related to average economic conditions. For the largest schemes, the only way of meaningfully assessing long-term risk would be to carry out an analysis of covenant strength, funding plans and investment strategy.

NAPF director of policy Nigel Peaple says: “We recognise the important role played by the PPF levy in guaranteeing member security and promoting confidence in pension provision. However, we must make sure it does not undermine current pension provision by placing too great a burden on well-funded schemes, especially where they are backed by a strong company.

“To give more certainty to pension schemes, we believe the aggregate levy should be capped at a fixed and specified level close to the current levy. The Government should assume responsibility for costs above current levy levels and should also be the ultimate guarantor of the PPF.

“While we can see the merit in making the levy more risk based, we think a different approach is needed for calculating long-term insolvency risk. We are more positive about the proposals regarding investment risk but we believe that substantial changes need to be made before risk is used in levy calculations.”

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