PPF says it aims to reduce levy
UK - The UK Pension Protection Fund (PPF) aims to reduce its levy within the next five to 10 years, according to the fund's director of corporate affairs Paul Reynolds.
The PPF, set up under the Pensions Act 2004 as a pensions safety net, is in part funded by compulsory levies on all schemes that are eligible for protection under the arrangement.
Speaking at the eShare governance seminar in Reading yesterday, Reynolds said: "What we are looking to do is to collect money to enable us to get to a position of solvency where we can, and [then] possibly start reducing the levy."
He added: "If you look at the some of the other pension protection organisations around the world, for instance in Germany where they have been in operation for a number of years now, they have reached the position where they can start reducing the levy because their safety net is stable and [at a] secure level. The PPF is not there yet at all."
Reynolds argues the PPF has not been able to reduce levies yet as it has to play catch up.
The first year's levy, collected from April 2005, was set by the secretary of state for work and pensions and allowed the PPF to collect only £150m (€219m).
"Everybody recognised that the PPF in the early years would run a deficit," said Reynolds.
In August the PPF released a consultation exercise questioning whether the levy pension schemes pay should be fixed for three years.
The PPF board has suggested maintaining a stable, index-linked levy estimate for three years between 2008 and 2011, following calls from levy payers who wanted greater stability in the levy estimate and their levy bills.
Meanwhile, the PPF put out a tender for insolvency risk identification of defined benefit pension schemes today.
Incumbent service provider is Dan & Bradstreet whose contract was extended to 2009, a spokesman explained.
Prior to making a decision on a new contractor next year, the PPF wants to get into a framework agreement with up to three providers.
The insolvency risk assessment is used by the PPF in the levy calculation.
The deadline to participate in the tender is October 25.