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The Actuary The magazine of the Institute & Faculty of Actuaries
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PPF levy criticised

Mercer Human Resource Consulting has called for changes to the Pension Protection Fund (PPF) risk-related levy following a consultation period which ended on 4 October. It believes the financial strength of parent companies should be taken into account when setting levies for subsidiary organisations from 1 April 2006. Some companies, including major employers which present little risk to the PPF, could be required to pay over twice as much as necessary if the proposals are not amended.

The PPF’s risk-based levy reflects the risk that a company will become insolvent over the next year. In some cases this risk can be overstated because, although an employer might be at theoretical risk of failure, in practice another company in the group could step in to meet pension commitments. Mercer, which provides pensions advice and services to over 60 of the FTSE 100 companies, has called for the PPF to give credit for the financial strength of other group companies, provided they are prepared to support a scheme.

Tim Keogh, worldwide partner at Mercer, said: ‘We are very concerned that some employers will face excessive levies next year because the PPF will not recognise they are part of a strong corporate group. The PPF has said it is sympathetic but will need to consult further on the issue, with a risk of delay until 2007. This is not good enough when the levy bill could easily double in the meantime.’