UK - The Pension Protection Fund (PPF) levy scaling factor has been slammed by Watson Wyatt for potentially costing companies five times more than last year.
The PPF said the reason behind more than doubling the levy to £675m since last year was more extensive information collection and to make up for the shortfall it experienced in 2006.
However, Watson Wyatt senior consultant, Stephen Yeo, said the organisation was trying to claw back last year’s deficit: “Quite rightly it is attempting to raise a higher proportion of its income from higher risk schemes but there will be some companies that cannot afford to cover the cost that will go bust as a result.”
Yeo continued that the PPF was initially set up under a series of cost saving measures on the basis it would not cost more than £300m: “This year the levies will raise two and a quarter times as much, and there is no sign that the increases have stopped," he said.
PPF chief executive, Partha Dasgupta, disagreed: “It is important to remember as well that collecting what we have estimated helps ensure our long term ability to pay compensation to scheme members whose employers have gone bust – which is what we are here to do.”
The PPF maintained schemes posing the greatest risk should pay more in levies and this was the message from industry after consulation on the Pension Protection Levy.
A PPF spokesman added: “However, we have a risk based levy cap in place to protect the weakest 5% of schemes, ensuring that no scheme’s risk based levy is more than 1.25% of its liabilities."
He concluded:“The Pension Protection Levy was set up in a bid to provide levy payers with stability and we believe we have achieved this.”
The breakdown remains as in 2006/7 with 20% in scheme based and 80% in risk based levy.
The PPF said levy invoices would be issued in the summer.
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