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Pension fund levy fears eased

Pension fund levy fears eased
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Pension fund levy fears eased

Finance | Gareth Jones | 1 Mar 2006

Charities fears have been eased over the potentially high levies they may have to pay to the Pension Protection Fund. The fund has been established to pay compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover it.

Under the proposals, from 6 April 2006 weaker defined benefit pension funds, based on a Dun and Bradstreet credit rating, will pay a far higher levy than stronger schemes. Charities feared the proposals could be discriminatory because they do not have big reserves and so will be perceived a high credit risk.

A sector working party consisting of directors of finance, CFDG, the Charities Consortium and special advisers, had lobbied on the potentially serious impact of the levy. However, Ian Theodoreson, finance director of Barnardo's speaking on behalf of the working party, said that most charities were achieving good credit scores. For example, National Trust started at 8, but was now closer to 100. "The low scores were initially simply because Dun and Bradstreet hadn't dealt with charities before."

However, he said a worry remained about increases to the levy in future years. "While we think its right that charities should be included, we have argued unsuccessfully that charities should be protected against a potential increase of up to 25 per cent. Charities cannot afford over inflation hits if the levy does increase dramatically.

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