The Pension Protection Fund Ombudsman has ruled the PPF must reconsider the 2011/2012 levy bill for Ibstock Pension Scheme, after an error in the scheme's deficit reduction certificate led to an additional £140,000 charge.
As schemes prepare to submit their DRC and contingent assets documentation for the 2013/2014 year, Tony King's ruling could not be timelier.
The case raises interesting questions about the way in which the PPF applies policy, as well as serving as a stark reminder for schemes to make sure they have their paperwork in order.
A costly error
In 2011, Ibstock submitted proof it had taken steps to improve the security of its scheme, with a £54.1m deficit reduction payment amounting to more than 15% of the schemes assets. Yet an incorrect date on its DRC left the trustees facing significant charges they had not accounted for.
The initial DRC submission included an effective date of 31 March 2008 for the s179 valuation, instead of the correct date of 31 March 2009. The PPF discounted the certificate, as it was not based on the current valuation. Had it been taken into account, the levy for the year would have been £140,000 lower.
Despite certification from the actuary that the DRC payment was "legitimate" and "prudent", the PPF stood by its decision and refused to allow an amendment to the data.
Allen & Overy partner Dana Burstow says the PPF's approach to Ibstock's case is typical of how it approaches requests for data amendments.
She says: "Traditionally the PPF has been very strict on accepting amendments to deficit reduction certificates. As a result, there is sometimes a great sense of injustice around dealings with the PPF."
Much of the dispute centred on whether or not the PPF could exercise discretion in this case. The PPF had argued there were no extenuating circumstances that would justify allowing the amendment.
Eversheds partner Lynette Lewis said that while the right to use discretion is enshrined in the PPF's principles, it is "rarely used at an initial stage".
"Trustees and employers often need to push the PPF in the right direction," she explains.
Despite this, not many PPF cases go as far as the PPF Ombudsman, Lewis notes, with most challenges going as far as the Reconsideration Committee.
Burstow says it is "incredibly difficult" for schemes to challenge PPF decisions.
"The actual process of submitting appeals is quite lengthy and demanding," she explains.
"It really is vital that schemes get things right the first time round. It's incredibly important information is filed in an accurate and timely manner. We've seen a number of schemes caught out by incorrect data in the past."
It has taken more than 18 months for the case to be reviewed by the Ombudsman, leaving the trustees facing uncertainty for an extended period. Even with King's ruling, the matter has not been settled, with the PPF saying it will publish its reviewed decision "in due course".
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