The Pensions Trust has made savings of over £600,000 on its defined benefit pension scheme through the successful appeal of 11 Pension Protection Fund (PFF) levy invoices.

The pension protection levy is one of the ways that the PPF funds the compensation payable to members of schemes that transfer to the Pension Protection Fund.

The levy cost is related to the perceived risk of the pension fund.

The Pensions Trust challenged some of its invoices from the PPF on the ground that the incorrect Dun & Bradstreet 'DUNS' numbers were being picked up on the PPF levy invoices for some of its employers. The DUNS number is effectively an identifier for a business.

A 'Failure Score' is allocated to each employer (and hence DUNS number) and this score determines each employer’s insolvency risk in the next 12 months. This ultimately impacts on the level of risk-based PPF levy charge.

The Pensions Trust invoices relate to the 2010-2011 levy year for 36 DB Schemes. The original invoices amounted to a combined £2.25m and this has been reduced to a final total of £1.63m by the PPF.

Logan Anderson, head of customer relations said: "At the Pensions Trust, we are committed to providing the best service to our members, and constantly strive to ensure they get the most from their pension scheme. By successfully appealing these PPF levies, the savings made can instead go towards the provision of their pension benefits.

"In addition, The PPF has published its levy framework that will apply for the three years from 2012-13, which includes the introduction of the ‘Herfindahl index’ as the method for determining insolvency probability in the last man standing non-associated pension schemes. Later this year we will be assessing the full impact of the new basis on our own schemes’ levies."

Under the new rules, the PPF will:

• use an average five-year measure for underfunding risk; (This will ensure that sharp movements in financial markets will have less of an effect on a scheme’s year-on-year levy.)
• calculate an employer’s insolvency risk as an average over the year, with the employer’s ‘failure score’ measured each month; and (Previously this was measured once a year.)
• place employers in one of ten risk categories. (Previously 100 risk categories were used.)

In addition, investment risk will be taken into account in the risk-based element of the levy for the first time. This will be done by applying ‘stress tests’ to a scheme’s asset and liability values.

The PPF has stated that well-funded schemes and those with lower risk investment strategies will see lower levies under the new framework. However, poorly funded schemes with a strong employer covenant and those with higher risk investment strategies will experience higher levies.