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PPF rejects Aon levy attack

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.”

December 2003

Asps are first proposed in the Government’s consultation on simplifying the taxation of pensionsAugust 2004

Asps included in Finance Act 2004 to come into effect from A-DayJuly 2005

HMRC issues a consultation paper on inheritance tax and Asps, suggesting that there should be an inheritance tax charge on leftover Asp fundsMarch 2006

The Budget confirms that an IHT charge will apply to Asps with effect from A-DayJuly 2006

Treasury Economic Secretary Ed Balls tells Parliament: “This is not a mainstream product and it must not become a tax-avoidance measure.”

July 2006

IHT measures are included in the Finance Act 2006 backdated to A-DayOctober 2006

Balls tells a Financial Services Forum: “The danger is that it contradicts our view on forced annuitisation at 75, potentially has some tax problems for us and is outside the original intention”


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