Appointing directors with business failures behind them could jeopardise savings for companies which pay into the Pension Protection Fund (PPF), according to Aon Consulting, a leading pension, benefits and HR consulting firm. Speaking to companies with final salary schemes today in Birmingham, in the first of a series of regional seminars, Aon is urging companies to adopt measures that will improve their failure score and reduce their levy into the PPF.
PPF proposals mean that a companyís position at 31 March 2008 will be used to set levies for two years, making it crucial for businesses to improve their position over the next six months. Contributions are based on a companyís pension deficit and its risk of insolvency, ie its subsequent need to claim from the PPF, which is measured by a Dun & Bradstreet failure score.
Aon, which has saved its clients over 40 million in levies in the past two years, is highlighting various actions to ease the financial impact of the obligatory levy by looking at ways to improve failure scores. These include:
appointing directors with experience of running successful businesses as scores will take into account management histories of insolvencies. The more directors the better, as a board of ten is less likely to make a poor decision than a sole director;
satisfying outstanding county court judgments or secured charges as a ëquick winí to improve a credit rating;
paying supplier invoices on time, as the average time you take to settle is taken into account.
Paul McGlone, principal & actuary at Aon Consulting, said: Year 2007/08 saw substantial increases in PPF levies and up to five fold for some companies on the previous year. The levies are expected to rise again in March so keeping your scheme's levy at a low level is important. For schemes and companies that are prepared to devote energy to this issue, there are considerable savings to be made. On the other hand, those that don't tackle the issue will find not only that they miss out on the benefit from levy reductions, but they may also see increases over time to compensate for the actions taken by other schemes.
Robert Palmer, senior consultant and actuary at Aon Consulting in Birmingham, added: ìThe Midlands has many long standing businesses with correspondingly mature final salary schemes. This legacy of pension provision is placing a significant burden on many of our clients and out of proportion with the size of their current operations. Weíve successfully worked with many of our clients to reduce the size of their levies and are now encouraging other local companies to consider the options to help them also alleviate this burden.î
Successful Directors Could Cut Pension Levies
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