UK - The Pension Protection Fund is penalising better-funded firms in an effort to meet the costs of "very generous" benefits, claimed Hymans Robertson.
Responding to the PPF's levy consultation, which closed on January 11, the consulting firm said the decision to increase the funding level at which schemes no longer pay a risk-based levy from 125% to 140% is "anything but fair".
The "firm" proposals for the structure of the 2008/09 and 2009/10 pension protection levy were published in November, with the PPF claiming at the time raising the exemption level to schemes which are 140% fully-funded would "ensure that schemes pay a levy which more accurately reflects the long-term risk they pose to the PPF".
But Martin Potter, partner at Hymans Robertson, argued the PPF's proposals would increase the levy on schemes which have already taken "considerable and painful action" to reduce their funding shortfalls, with the possibilty some schemes could see a thirteen-fold increase to their original levy premium.
Although the PPF has claimed the changes are an attempt to redistribute the levy to reflect long-term rather than short-term risks, Potter said what it has done in practice is to "penalise the better-funded schemes" and protect the under-funded schemes who have not yet taken any action to address their deficits.
He revealed the proposals had confirmed earlier fears, first raised when the PPF was established in 2005, that the only way the"very generous" level of benefits being provided "would ever be funded was to increasingly load the costs onto the better funded schemes," which are unlikely ever to need support from the PPF.
"Unfortunately our prediction seems to have been borne out. This has all been done in the interests of "fairness". In our view, the proposals by the PPF are anything but fair," added Potter.
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