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PPF levy soars to 575m

The Pension Protection Fund risk-based levy of 575m this year will cost firms almost double the amount that was forecast initially.

The figure is significantly below many industry forecasts, which had ranged as high as 900m but still way above the Governments’s original projection of 300m.

Consultancy Watson Wyatt warns that the levy will cost each pension scheme employee member an average of 160 and that amount is lik- ely to increase in future as more schemes fall into the protection scheme.

Senior consultant Stephen Yeo says: “If the cost is held down now, it will rise later. No one should be under the illusion that the risk-based levy eliminates all cross- subsidies from schemes with strong employers to weaker schemes.”

The levy will be capped at 0.5 per cent of a scheme’s PPF liabilities to ensure that weaker schemes are not forced deeper into crisis and there is no levy payable for schemes over 125 per cent funded on a PPF basis.

The PPF board says it will recognise contingent assets such as guarantees from parent firms and letters of credit in the levy calculation.

The Association of Consulting Actuaries says that the levy is lower than had been feared but the CBI says the cost is unacceptable.

CBI director-general John Cridland says: “At more than half a billion pounds, it is nearly double the amount that the Government had stated. At this level, the cost is simply unacceptable to firms.”

Association of Consulting Actuaries chairman Adrian Waddingham says: “The higher the levy, the less that is available to invest in those pension funds.”

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