20 November 2006
Suggestions that the Pension Protection Fund should revise the
levy setting process will leave companies and pension schemes
unable to budget properly, according to Aon Consulting, which is
calling on the PPF to reject suggestions to delay setting the levy
scaling factor until after the March 2007 deadline.
According to Aon, the PPF is considering setting the 2007/08
scaling factor on 30 March 2007 rather than the several months
notice given ahead of the 2006/07 deadline on 31 March 2006. The
new approach would make it far more difficult for companies and
pension schemes to plan for the impact of levies on finances.
Paul McGlone, principal and actuary at Aon Consulting, said:
"The new approach being suggested would clearly be beneficial to
the PPF as it would give them far more certainty over the total
levies collected each year. The importance of this can be seen from
the 2006/07 figures, where an expected levy of £575 million
became an estimated levy of £324 million due to market
conditions and the actions taken by companies and trustees in
advance of 31 March 2006. However, this certainty for the PPF would
be at the cost of uncertainty for companies.
"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. A move such as
this would go against the grain of the consultative and business
friendly approach the PPF has adopted since its formation."
Aon understands that the PPF may consult on the change before
putting it in place and is calling on the PPF to ensure that a
proper consultation with the industry is held before taking any
such action.
In addition to looking at the potential 2007/08 levies Aon, on
behalf of its clients, has been evaluating the 2006/07 invoices
being sent out by the PPF. When reviewing these levies Aon has,
like many other companies, spotted a number of errors in the
invoices issued and arranged for revised invoices to be issued.
However, McGlone counselled caution against criticising the PPF
too heavily, commenting: "To date we have spotted errors totalling
millions of pounds on behalf of our clients. It should be noted
however that the vast majority of invoices are correct. Some errors
are understandable given the scale of the PPF's operation and the
fact that this is the first year that such complex levies, with
substantial data requirements, have been collected. The PPF have an
extremely difficult job to do. We would urge companies and trustees
to check their invoices carefully and raise any concerns directly
with the PPF or through the appeals process."
