The National Association of Pension Funds has warned that the not-for-profit sector could lose millions under the new framework proposed by the second Pension Protection Fund (PPF) Levy Triennium consultation.
Responding to the PPF’s consultation, the NAPF supports the creation of a specific not-for-profit scorecard, but acknowledges that the focus on financial data under the new model means that not-for-profit organisations - including charities, educational bodies, housing associations and government departments1 - are likely to be hardest hit by increased levy payments.
The new framework will bring an overall increase in the levy paid by the not-for-profit sector as a whole. Just under two thirds of not-for-profit pension schemes will see a reduction and around one third, an increase. But those not-for-profit schemes experiencing an increase in levy payments will see a larger change than those with a decrease2.
Whilst the focus on financial data is one reason for increased levies, lack of data on the sector is also an issue. There is a general lack of centrally provided financial data which means that some organisations will have higher initial levies. Not-for-profit organisations should engage early with both the PPF and Experian to provide information and ensure their scores are accurate.
Commenting on the consultation, Helen Forrest, Policy Lead: DB, NAPF, said: “The aim of this new model is to ensure that the levy better reflects the insolvency risk of the organisations sponsoring the defined benefit (DB) schemes. However, the move to a new PPF-specific model of insolvency risk is not without challenges and, overall, the not-for-profit sector looks set to be one of the losers in terms of increased levy payments. One of the reasons for this is the focus on financial data.
“The creation of a scorecard specifically for not-for-profit schemes presents a good opportunity for these schemes to ensure their levy accurately reflects their financial risk and the NAPF urges not- for-profit schemes to work with the PPF and Experian to improve the relevance, availability and quality of financial data available on their sponsor organisations.
“We fully support the ongoing evaluation of the not-for-profit definition and scorecard components and this is one of the topics the NAPF’s Charities Working Group is looking at closely. We are keen to hear from not-for-profit and charity employers on how these changes will affect their organisation.”
A copy of the NAPF’s consultation response in full, which was submitted 9 July 2014, can be found here.
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