The UK Pension Protection Fund (PPF) has defended its stance on forcing consultants to legally stand behind valuations of asset-backed contributions (ABC) when used to reduce levy payments.
The rebuttal comes after a recent consultation on the PPF levy saw consultants criticise requirements for the extended ‘duty of care’.
A spokesman for the lifeboat fund challenged advisers to give clear assurances on the valuation of ABCs if they were “confident about the value”.
In the last consultation before the new levy and solvency-risk formulas come into use, the PPF suggested ABCs would require an independent valuation that recognises a legal ‘duty of care’ to the fund.
This would be left to the consultant community, which thoroughly rejected the idea in its consultation responses and said it would affect the use of ABCs in levy calculations.
However, the PPF spokesman said the lifeboat fund was happy to accept ABCs and the contribution they make to scheme funding.
ABC structures involve sponsors giving schemes legal claim over an asset that provides income streams in return for a reduction in deficit contributions.
The use of these structures can potentially reduce the liability burden of a scheme entering the PPF, thus reducing the levy.
A PPF spokesman told IPE: “These are complex structures, and the value they have on insolvency may be very different to the value at which they are stated in scheme accounts.
“If advisers are confident about the value of these arrangements, they should be able to give assurance to trustees and to the PPF. And if they aren’t, we don’t think the PPF should give credit in levy calculation.
“Ultimately, if ABCs prove to be worthless, other levy payers end up paying the price.”
Responses from the Association of Consulting Actuaries (ACA), the Society of Pensions Professionals (SPP), Towers Watson and Aon Hewitt all said the extension of liability from trustees to advisers was unnecessary.
Towers Watson said a duty of care already existed for trustees, and that extending this to the PPF would not always be possible.
Senior consultant Joanne Shepard previously told IPE: “Subject to legal opinion, extending each adviser’s duty of care to the PPF may not always be unachievable – in which case, perfectly good assets would not be recognised for levy purposes.”
The ACA said it was not appropriate for advisers to have an uncapped liability to the lifeboat fund, given that there is a cap between advisers and trustees.
This was the lifeboat fund’s final consultation before Experian takes over from Dun & Bradstreet for the 2015-16 levy calculation.