EUROPE – UK pension funds will have to pay an estimated £575m (€848m) in Pension Protection Fund levies in 2006/7, which the PPF says is similar to the fees schemes pay asset managers.
The figure is almost twice the PPF’s original estimate.
“The cost of the levy is similar to fund manager fees,” said PPF finance director Partha Dasgupta.
He told IPE that, depending on liabilities, the levy would cost less than 30 basis points for 90% of schemes. And no scheme would pay more than 50bps of its liabilities due to a cap which the PPF says would benefit weaker schemes.
The estimates came as the PPF set out a series of proposals in response to a consultation, such as the inclusion of contingent assets such as fund sponsors’ property in the levy calculation. Other new factors include the disclosure that there would be no risk-based levy for schemes over 125% funded.
Another reaction to the consultation was that the number of insolvency risk bands has been increased from 10 to 100 in a bid to increase precision. No schemes will have to conduct out-of-cycle valuations, the PPF says.
And it added that action taken by companies over the next few months to lower their risk could reduce the actual figure collected.
“Our proposals strike the right balance between security for pension scheme members and cost to the levy payer,” said PPF chairman Lawrence Churchill.
“They demonstrate our commitment to listen to and work with industry to develop a levy that is fair, simple and proportionate. We believe that this vital protection could not be provided at a lower cost.”