PPF scaling factor increase will double expected levy says Watson Wyatt - EXCLUSIVE

The consultant’s calculations – which come the week after the PPF set the scaling factor for the risk-based levy at 3.77 – revealed that, for some schemes, the total levy will be eight times as big as under last year’s formula.

Its analysis found a scheme with £100m of PPF-protected liabilities, £105m of assets and a D&B failure score of 80 – which corresponds to a 0.3pc probability of becoming insolvent within one year – will receive a levy invoice of £161,268 in 2008/09.

Under the indicative formula published in November, this would have been £76,640 and under last year’s levy formula, it would be £20,446.

If a scheme is 90pc funded with a D&B rating of 40 and the 2007/08 formula had been used this year its bill would stand at £225,854. Using the final 2008/09 formula it would equal £508,250.

If another scheme was 120pc funded with a D&B score of 10 its levy bill would jump from £357,600 – using the indicative 2008/09 formula – to £746,020 using the final formula.

However, the PPF noted that only 42pc of schemes were expected to pay a higher risk-based levy, as a percentage of their assets in 2008-2009 than in 2007-2008.

And it said 58pc would pay a lower levy and 9pc of schemes were expected not to pay.

PPF chief executive Partha Dasgupta explained: "In the short-term, we have seen scheme funding and insolvency probabilities improve. But, it is long-term risk that we have to protect ourselves against, particularly as we are now in the middle of a credit crunch which can only mean a lot more uncertainty for the future."