Companies with final-salary pension schemes have been given a little breathing room by the Pension Protection Fund, under details of the risk-based levy for the fiscal year 2006/2007 announced this morning.
Following a 12-week consultation with the industry, the PPF board says three themes carried widespread support, two of which it intends to incorporate into its proposals.
More specifically, special cash contributions made since the last scheme valuation will be counted towards recognition of the efforts companies are making to repair deficits, estimated at some £21bn, says the levy panel.
Similarly, requests for more time to to submit details of the defined benefit schemes is being made available by the PPF, as the deadline for information is being moved back three months to 31 March 2006.
There is, however, a third issue regarding contingent assets which has yet to be tackled, as the PPF Board says it is “minded to take account” of these in the risk-based levy calculation, and will come forward with further proposals for consultation.
In addition, the PPF has announced improvements to its valuation guidelines which, it says, will make valuations easier and cheaper, as well as more detailed information on how the risk of different categories of multi-employer schemes will be assessed.
Lawrence Churchill, chairman of the PPF says: "We have been pleased with the constructive response we have received from the industry. The proposals outlined today demonstrate our commitment to work with the industry to develop a risk based levy that is simple, fair and proportionate.
"Simplifying the scheme valuation process, and extending the deadline for submitting valuations to the PPF will make it easier for scheme valuations to be completed. It will also enable scheme valuations, and the risk based levy, to recognise the important deficit reduction contributions being made by companies to improve their funding position.
"We recognise that contingent assets have an important role to play in reducing risk, and are minded to make an allowance for them in the calculation of the risk based levy. To enable us to do this we have already started engaging with industry specialists to understand the associated legal and financial risks, and how the value of contingent assets should be fairly reflected in a scheme's levy calculation."
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