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PPF dismisses criticism over levy setting restructure

The Pension Protection Fund has rejected critisicm that changes to the way it sets levies will wreak havoc with companies’ budgeting processes.

Aon says the PPF is considering setting the 2007/08 scaling factor on 30 March 2007 rather than the several months notice given ahead of the 2007/7 deadline on 31 March 2006. It says the new approach would make it much more difficult for companies and pension schemes to plan for the impact of levies on finances.

Aon Consulting principal and actuary Paul McGlone says although the new suggested would give the PPF more certainty this could be at the expense of companies. He highlights the situation in 2006/7 where an expected levy of £575m became an estimated levy of £324m due to market conditions and the actions taken by companies and trustees in advance of 31 March 2006.

He says: “It would mean that individual company levies could not be estimated in advance. This would play havoc with budgetting processes and leave companies without the necessary information required to take decisions. A company considering a cash injection into their pension scheme may reach a very different conclusion depending on whether the scaling factor is 0.5 or 1.”

But the PPF says it will consult with the industry next month and publish an indicative scaling factor which can be used to estimate the levy. It will then produce another scaling factor next March but a PPF spokesman says this will be very similar.

A PPF spokesman says: “There won’t be any surprises for firms. The figures announced next month will be much the same as those announced next March.”

Aon also says it has spotted a number of errors in the invoices sent to firms for the 2006/7 levies totalling millions of pounds.

But the PPF spokesman says much of the problems lie with insufficient data supplied by firms. He says: “We have issued over 2000 levy invoices and only received queries on 17 per cent of them.”

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