Following the announcement that the PPF are consulting on plans to include longer-term risks in levy calculations, Aon Consulting has issued the following comment:

Milan Makhecha, consultant and actuary at Aon Consulting said:

"It is clear that the PPF has thought very carefully about the levy formulae and tried to refine the balance between 'simplicity' and 'fairness,' and we welcome this approach.

"We are pleased that instead of the PPF advocating an increase in the overall levy it wants to collect, it is tackling a number of issues. It must be noted that the new proposals will cause the share of the overall levy to be redistributed amongst schemes.  However, this approach will correct the injustice caused by the current, simple levy structure, meaning schemes pay levies that are more aligned to the long-term risks they pose to the PPF. This will place even greater importance for schemes on managing risk sensibly going forwards.

"Using this new formula, the PPF will not require any additional information from schemes to calculate levies, especially in relation to schemes' investment strategies.  While this is welcomed, it should be noted that there will be some schemes with complex investment strategies designed to mitigate risk, and these schemes may not gain full benefit because of this.  Schemes will be looking closely at the small-print to ensure that the full extent of their risk mitigation strategies are recognised by the PPF in the new levy formulae.  And of course, it will be more important than ever to review PPF levy invoices, as they will become more complex, when they arrive.

"As a final note, we believe that the PPF will need to carefully consider the responses they receive from this consultation as there could be much debate about the practicalities of the proposals, rather than the concept of them.  Therefore, it is important for the PPF to strike the balance between complexity of approach and fairness for all.  Aon welcomes the fact that the PPF are aware of the time it will take for everyone to adjust to the new approach in proposing to introduce this from 2011/12 onwards."

ENDS

 
For further information, please contact:
Susie Patterson / Josephine Corbett
0207 269 7233 / 7250
Susie.patterson@fd.com / josephine.corbett@fd.com

David Skapinker
020 7505 7478
David.skapinker@aon.co.uk
http://aon.mediaroom.com