LONDON, October 06, 2006 - Aon Consulting, a leading pension, benefits and HR consulting firm, welcomes the Pension Protection Fund's (PPF) decision to instruct Dun & Bradstreet to review up to 150 large companies with low failure scores.  As a result of this review process, many companies have had their failure scores retrospectively increased, resulting in significant falls to their risk-based levies.

Amongst Aon Consulting's own client base, the levies of twelve companies have fallen either as part of this process or from separate appeals.  Overall, risk-based levies for these companies fell by 74% on average as a consequence of revised failure scores.  According to Aon Consulting, it is likely that the PPF have adjusted the levies for these companies for fear of a deluge of appeals from companies where the scores were impacted by reasons such as County Court Judgments (CCJs) or slow payment of invoices.

These factors have a substantial impact on the D&B failure scores but do not represent a material insolvency risk for large companies.

However, whilst this is good news for the organisations that had their levies reviewed automatically as part of this process, Aon Consulting is advising all companies to consider whether they should also be making an appeal when reviewing the invoices issued by the PPF for the 2006/07 levies.

Paul McGlone, a Principal and Actuary at Aon Consulting, said: "We understand that the PPF proactively reviewed the risk scores of larger companies with low failure scores on the grounds that factors such as County Court Judgments - that usually are immaterial in gauging insolvency risk at large concerns - could disproportionately increase levies.  However, the PPF has not provided any statement as to why these levies have been reduced, and we would encourage them to do so, so that all companies know where they stand on this matter.

"Even a small move in the risk score can dramatically affect some levies.  We are aware of 12 clients included in this first PPF review. The largest saving flowing from the revised risk scores was 94% and the average was 74%.  So far as we are aware, the PPF has not initiated any reviews for smaller companies. This is understandable, since the PPF will want to tackle the most significant issues first.  However, the size of the reductions demonstrated by this review shows that significant changes can be achieved by appealing a score.  Companies and schemes of all sizes could potentially benefit.

"Companies only have 28 days from the issue of the PPF pension protection levy invoice date to lodge an appeal, which means that companies need to start the process quickly upon receiving their invoice. The PPF started issuing invoices last month and companies should consider the potential savings from appealing levies against the costs involved."

The PPF initially announced that it expected to raise £575m from the 2006/07 levy on defined benefit pension fund sponsoring companies. The levy comprises a scheme based levy and risk based levy. The former will raise 20% of total levies (based on a scheme's proportion of PPF liabilities) and the latter 80% (based on a scheme's underfunding risk and the sponsoring company's insolvency risk as calculated by Dun & Bradstreet).  However, a combination of favourable investment conditions at 31 March 2006, special contributions by companies and efforts to increase failure scores have given rise to speculation that the actual amount collected could be significantly lower than this.

The PPF was established by the Pensions Act 2004 and commenced operations in April 2005. The PPF issued a consultation on 2007/08 risk based levies last month and comments are required by 9 October.

Notes to editor:

About Aon

Aon Corporation is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

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