COMPANIES WILL TODAY receive a new ratings score that will determine how much they must pay towards the Government's £575m pension fund safety net, reports The Times .
According to the paper, directors will learn how common errors such as the late payment of invoices and county court judgments have affected the “failure scores” calculated by Dun & Bradstreet, the credit-rating firm that is being used by the Government’s Pension Protection Fund (PPF).
Businesses have spent the past year putting in place measures to improve their score and thereby decrease the amount that they will be required to pay into the PPF. Initiatives have included injecting cash into pension scheme deficits and changing company structures to mitigate the impact of a weak parent or subsidiary.
Paul McGlone, of Aon Consulting, the actuarial consultancy, is quoted as saying: “Companies are doing everything they can to get their rating down. A lot of scores can be knocked from the 80s to the 20s with a single CCJ (county court judgment). A client of mine saw their score go down ten points because their accounts department did not pay a number of small invoices within eighteen days.”
McGlone said he had heard rumours of companies replacing young directors with those with more experience in an effort to improve their D&B rating, which takes into account the age of board members.
Factors such as board members with a history of involvement in insolvent companies and the location of a firm’s headquarters can also have a negative impact on the PPF rating — with businesses based in the North of England attracting a less favourable score than those in the South.
The scores range from 100 for an exceptionally financially strong company to one for a business that has a high probability of collapse — and therefore risks landing the PPF with its final-salary scheme deficit.
D&B uses more than 20 years’ of data on companies’ creditworthiness to work out the scores. Combined with the size of the company’s pension-fund deficit, the scores will decide how much the company must contribute to the PPF, which will hold a total of £575m for the 2006-07 financial year. This year the levy on companies will be 80% based on their risk to the fund and 20% on a flat rate.
STANDARD LIFE HAS decided to risk the wrath of City corporate governance watchdogs by refusing to set a definitive leaving date for its chairman, Sir Brian Stewart, reports The Daily Telegraph.
The Edinburgh-based life assurer is hoping to list on the London Stock Exchange this summer if it wins the backing of three-quarters of its 2.5 million members at a meeting on May 31.
However, Sir Brian's role has been under scrutiny because he also chairs brewer Scottish & Newcastle. The City's combined code on corporate governance frowns on individuals chairing more than one FTSE 100 company.
Reports have claimed that Standard Life's "vote and proposal" packs, to be published on April 18, will say that Sir Brian will stand down in 12 months' time. But it is understood that they will not specify a leaving date.
A source familiar with the mutual's thinking is quoted as saying: "The prospectus is going to say that Brian will stay to see the business established and then Standard Life will make its mind up. What people want is certainty, without any debate or disruption, [to] get the thing done. It would be absolutely stupid for Brian to exit from Standard Life at float."
Sir Brian declined to comment on his plans. However, in an interview with The Daily Telegraph he said Standard Life was ready to explain his position to the City. Scott White, Standard Life's spokesman, told the paper: "Sir Brian Stewart will definitely be staying on for the float and for the transition to a plc, if that is what members vote for.”
Corporate governance watchdogs say they will pass judgment on Sir Brian's role once Standard Life lists, as planned, in July. Standard Life is planning to set up checks and balances to protect the members of the assurer's £30bn with-profits fund.
BOARD MEMBERS AT MANY financial services companies are paying scant attention to a new European Union directive that is set to trigger a dramatic overhaul of regulation in the sector, research has found, reports The Financial Times.
Nearly 50% of executives working on the markets in financial instruments directive (Mifid) say their superiors have a "poor" or "very poor" understanding of its implications, according to a survey by KPMG and the Economist Intelligence Unit.
The directive, which must be implemented by November 2007, is likely to force a systems shake-up at many financial services companies and will demand changes to the way they deal with customers and regulators.
But the survey results, which cover the whole EU and are published today, point to a lack of preparedness. Some 71% of institutions have not yet assigned a project leader to oversee Mifid implementation and 83% have not allocated a budget.
The directive's goal is to increase cross-border competition and improve investor protection by replacing a patchwork of national rules with harmonised EU-wide regulations. But the research suggests that many institutions - to the extent they are thinking about Mifid at all - see it in narrower terms.
Institutions are divided between those that see Mifid as a compliance and IT chore and those that view it as a "strategic opportunity" to reform their operations and win new business, the report says. Even the Financial Services Authority, the UK market regulator and one of the EU's most influential watchdogs, has expressed doubts about whether the benefits of Mifid to the UK will justify its costs.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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