Aon Hewitt has commented on the implications of the Pension Protection Fund's (PPF) decision to replace its assessor of insolvency risk, Dun & Bradstreet (D&B) with Experian.
Milan Makhecha, principal consultant at Aon Hewitt, said:
"It's clear there is now a lot of work to be done by both the PPF and Experian. In order to assess the 2015/16 levy, it appears Experian will need to provide sponsor ratings at each month-end from April 2014 onwards – if we assume the current framework of monthly measurement of insolvency risk is retained.
"That deadline is just nine months away, so within that time Experian need to come up with a sponsor rating model and the PPF need to publish their proposals for the levy triennium starting from 2015/16. The PPF is also yet to publish its Determination for this year’s levy (2014/15). That all feels like a tough ask."
Milan Makhecha continued:
"There are also significant implications for pension schemes themselves. It took some time for them to get a really good understanding of their sponsors' D&B scores and their feedback helped refine the system over the years. That process will – to some extent – inevitably need to be repeated with Experian.
"However, this may also provide a chance for a re-think of the levy system; there were some perceptions of unfairness about the previous scoring system and schemes will undoubtedly appreciate the PPF and Experian finding ways of refining it. For example, this is an opportunity for a comprehensive review of the way schemes and their sponsors can influence and challenge their ratings. At least, that would ensure that any issues with the new system can be rectified quickly - but it is imperative this is all implemented with the least pain and expense for pension schemes."
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