UK - The Pensions Trust has revealed it is facing an extra £850,000 (€1.1bn) levy on its schemes, after the Pension Protection Fund (PPF) changed its scaling factor for calculating its risk-based levy.

The multi-employer scheme for 4,000 pension funds in the charitable, social, educational, voluntary and not-for-profit sectors, said because the PPF had failed to plan its funding requirements adequately, its three largest multi-employer schemes face an additional risk-based levy of £670,000.

As a result, The Pensions Trust said calculations for its total PPF levy - using the new scaling factor - is now estimated at £2.25m, up from £1.4m, in spite of the PPF's recognition that charities carry a lower risk of insolvency than commercial organisations.

The PPF revealed earlier this month it had changed the scaling factor used in calculating the risk-based levy for 2008/09 from 1.6 to 3.77 -more than twice the figure - in an attempt to ensure it still collects the £675m needed to fund its own operations. (See earlier IPE article: PPF ‘war chest' levy doubles pensions pressure)

It claimed the new figure had been based on data provided by schemes at March 31 2008, which included scheme funding levels and any direct action taken to improve risk scores from Dun & Bradstreet.

Logan Anderson, head of customer relations at The Pensions Trust, said; "We accept that the provisional figure carried a caveat, but we are dismayed that the PPF could get this so wrong.

"We have engaged with the PPF, Dun & Bradstreet and our participating employers to try to ensure that our clients are treated more fairly. Now we just have to hope that those efforts will, to some extent, mitigate the impact of this unforeseen increase in the levy scaling factor," he added.

Anderson argued the announcement is "all the more galling" as the chances of the 165 organisations in the Scottish Federation of Housing Associations Pension Scheme, the 700 employers in the Social Housing Pension Scheme, and 2,600 separate charitable organisations all becoming insolvent in the same year is "practically nil".

"We wonder when the levy is going to stabilise so we can make sensible provision for it in our schemes' funding plans. The current situation is simply unacceptable," Anderson added.

The Pensions Trust pointed out as charities are not required to submit their accounts to Companies House, D&B does not receive a feed of financial information used to assess an employer's failure score, as it does for limited companies.

It claimed that D&B "makes no effort to obtain this information for charities" and that the PPF has not put an obligation for D&B to obtain this information as part of its contract, so a "natural consequence of this is that an additional burden is put on trusts and voluntary organisations".

As a result it said a key part of its work is to encourage member organisations to engage with and submit accounts to D&B in an effort to reduce the levy payable, which should "to some extent mitigate the impact of the unforeseen increase in the levy scaling factor". 

However, a spokeswoman for the PPF said: "Following our consultation with industry last year, we announced that D&B have introduced a special methodology for charities and non-commercial organisations that better reflects their unique characteristics. This means that - in general - charities should have improved failure scores."

"With this year's levy scaling factor, we had to take account of the significant volatility seen in scheme risk during the last 12 months - and make sure that we still collect the £675m we said we need to collect. Back in November, we highlighted how the indicative scaling factor was likely to change significantly," she added.

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