Levy prompts yet more debate

It is a question which is stirring vigorous debate.

Buck Consultants is adamant the PPF would be right to consider taking hedge fund strategies into account. It says while levy calculations should not be overcomplicated, it could "not see the logic of ignoring such an obviously major factor as investment risk".

But the Investment Management Association is opposed to the plan and believes it would be "dangerous" to take scheme investment strategy into account.

Chief executive Richard Saunders is concerned it would be based on a "fairly crude equation of the scheme’s exposure to equities". Saunders points out equities are not a high-risk investment for schemes which have low cashflow requirements relative to their assets.

Buck’s head of investment consulting, Steven White, on the other hand says many client s have increased diversification and hedge fund strategies to reduce risk while maintaining prospects for long-term growth.

This disparity only underlines the difficulties that trustees face.

But is the government’s obsession with making trustee boards "more professional" the answer?

Watson Wyatt partner and Simplification Report author Alan Pickering believes ministers are "barking up the wrong tree".

No one disputes that increasing trustees’ knowledge and understanding benefits schemes and their members.

It is patently absurd to expect trustees to be "experts" in all fields – it is not their function. But if trustees are going to adopt more sophisticated investment strategies, the PPF should give them credit for doing so. Otherwise, as the IMA points out, "schemes that take the biggest risk will have the biggest levy". And that benefits no one at all.