Aon warns on Pension Protection Fund levy rise
by Gill Montia
Story link: Aon warns on Pension Protection Fund levy rise
Aon Hewitt is urging UK companies to take action now to limit the effect of the significant increases expected in Pension Protection Fund (PPF) levies for 2013/2014.
According to the human resources firm, the PPF is expected to increase substantially the amount required of schemes next year, based on its current way of calculating the levy.
However, companies still have the chance to reduce the amount required of them. If they proactively manage the credit ratings used to establish PPF levies (Dun & Bradstreet (D&B) failure scores) they could achieve a significant reduction to their eventual PPF levy.
Aon Hewitt principal consultant, Milan Makhecha, explains: “In our experience it is not uncommon for small increases in D&B scores to lead to reductions of around 50%-60% in PPF levies.
“It’s clear that the PPF faces a difficult dilemma – whether to bank the levy windfall from low UK gilt yields, or tinker with the fixed formula they set last year.
“The problem for companies is that they may not know what the PPF decides to do until September.
“This may be too late for some, given the PPF takes a 12-month average of D&B failure scores for the levy calculation, but many UK companies still have time – if they act fast – to understand their credit rating and act to improve it.”