The Pension Protection Fund has rejected criticism that changes to the way it sets its levies will wreak havoc with firms’ budgeting processes.
Aon Consulting says the PPF is considering setting the 2007/08 scaling factor on March 30, 2007 rather than the several months’ notice given ahead of the 2007/08 deadline on March 31, 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 principal and actuary Paul McGlone says although the new proposals would give the PPF more certainty, this could pose problems for companies.
He highlights the situation in 2006/07, when 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 March 31, 2006.
He says: “It would mean that individual company levies could not be estimated in advance. This would play havoc with budgeting 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 produce another scaling factor next March but says it will be very similar. The spokesman says: “There will not be any surprises for firms. The figures to be announced next month will be much the same as those announced next March.”
Aon also says it has found errors in invoices sent to firms for the 2006/07 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 2,000 levy invoices and only received queries on 17 per cent of them.”
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