UK - The Occupational Pensions Trust (OPT) has attacked proposals to change the Pension Protection Fund (PPF) risk-based levy as potentially damaging to funding levels.
Ben Shaw, director of development, OPT, said: "It appears the PPF may pursue plans to also take a scheme's investment strategy into account for future levy assessments, the premise being that higher-risk assets merit a higher levy.
"Giving up this potential for dynamic growth could inadvertently keep more schemes permanently on the sick list."
The OPT said schemes were in a 'catch-22' situation, whereby choosing an adventurous, growth-oriented investment strategy would result in a higher levy, while less volatile allocations would increase risks of scheme failure.
Shaw added: "Removing volatility also removes growth potential, and with it the prospect of a scheme ever moving back into financial health through its investment performance. Strangling growth is likely to see more schemes eventually falling into the PPF, raising the levy further."
Partha Dasgupta, chief executive, PPF, commented: "The PPF is not in the business of trying to influence the investment strategies of relevant pension schemes. We believe that a scheme's investment strategy is a matter solely for the scheme's trustees and its sponsoring employer.
"What we are doing is considering how we might better reflect the long-term risks we face when calculating the pension protection levy paid by eligible schemes. One way of doing this may be to give credit to those schemes that have taken steps to de-risk their investment strategies."
Dasgupta said there were more ways for funds to manage investment risk than simply switching equities to bonds.
He added PPF would consult on the future of the levy in the autumn and looked forward to contributions from stakeholders.
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