UK - According to documents obtained under the Freedom of Information Act in the UK, pension funds and industry bodies urged the Pension Protection Fund (PPF) not to implement proposals to redistribute the levy so pension schemes posing the greatest catastrophic risk pay more.
But a number of responses revealed the concerns of larger pension funds, and their representative bodies.
The trustee directors of the BT Pension Scheme said in their response they were concerned that applying a catastrophic risk element would increase the levy for the largest 130 pension schemes.
The trustees argued that schemes in distress and with problems tended to be at the smaller end of the scale. They said: "The larger schemes are more likely to be better managed, better supported by the sponsors, better funded, subject to more regulator scrutiny than smaller funds, and very much less at risk of falling into the PPF.
"Large pension schemes are already subsidising smaller schemes regarding the PPF levy and there is no justification for further subsidy through so-called catastrophic risk."
AstraZeneca, the sponsor of a large UK defined benefit scheme, said it believed the consultation analysis did not give sufficient weight to multiple failures of small schemes, which unfairly weighted catastrophic risk towards larger schemes.
It said: "AstraZenaca's preferred position is for the levy to be distributed between schemes purely on an expected claims basis with adjustments to the total levy being used to allow for catastrophic risk."
Hewitt also raised concerns the proposals would redistribute the levy to larger, stronger schemes, which it said was an unnecessary burden.
The National Association of Pension Funds (NAPF) said it was not convinced such a redistribution was desirable.
It said one concern was that the measurement of catastrophic risk appeared to be linked to the size of a scheme's liabilities, without taking into account the financial health of the scheme sponsor, which was recognised in the measure of insolvency risk.
It argued a larger fund should only present a larger catastrophic risk if it was also a large liability for the sponsor.
It said: "In essence, many NAPF members feel that it is not appropriate to include catastrophic risk in the levy allocation process."
However, the Association of British Insurers said it supported the proposed refinement to the levy as it was in line with risk-based pricing principles.
It said: "Adopting multiple scaling factors to reflect the schemes which pose the greatest catastrophe or tail risk should result in a fairer levy payment to the smaller schemes - which, by definition, do not make a large contribution to such tail risk."
A spokeswoman for the PPF said it would be consulting on the long-term development of the levy later in the year and its long-term goal was to optimise the fit between the way the total levy estimate was distributed between all eligible schemes and the theoretical levy produced by its long term risk model.
She said the discussion on catastrophic risk was an outline of the PPF's thinking for 2010-11 and beyond.
She said: "The PPF will carry out further work in this area, which will inform the consultation later in the year. Again, this will be informed by discussions with industry and stakeholders.
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