IoD says Pension Protection Fund Levy – not as bad as we feared

16 December 2005

The Institute of Directors (IoD) broadly welcomed today's announcement of the levy by the Pension Protection Fund.

Miles Templeman, Director-General of the IoD, said:

"This is a very difficult area where a sensible balance needs to be struck to ensure the security of pension scheme members whilst making sure the levy cost is not too great. The PPF proposals announced today appear to get the balance about right. However, there is little doubt that the PPF will hasten the demise of many defined benefit schemes.

“Just when the private sector is forced to dig deeper by the PPF levy, the Government cannot back-off reforming public sector defined benefit schemes.  Public sector defined benefit schemes are simply not sustainable without radical reform – the Government must get its own house in order.”

The IoD said that whilst the 2006-07 levy estimate of £575 million was double initial estimates, it was still less than many pension experts feared. The announcement of the levy means that companies now have a clearer picture of what they will pay.

If companies take action over the next three months to reduce their risk exposure the actual amount paid will be less than the levy announced today. The IoD urges all companies affected by the levy to contact the Pension Protection Fund, or their advisers, if they have taken measures to reduce their scheme under funding risk. Companies should also contact the Pension Protection Fund if they believe their employer insolvency risk assessment is wrong.