Levy rise of 15% still good value, says PPF

In seeking to explain a 15 per cent rise in levy for 2013/14, the Pension Protection Fund’s chief executive said the new levy would still only amount to around 6 basis points.

This was calculated on the PPF’s levy estimate standing at £630m for next year, compared with defined benefit assets totalling £1trn.

Rubenstein said: “You find me an active manager that is adding value; find me one that charges less than five times that and I will be amazed.

“Compared with the cost of your asset manager, the cost of the PPF is pretty low.”

He added that the levy rise could have been higher bearing in mind that overall deficits had grown from £50bn to £300bn between March 2011 and March 2013.

He said the fund’s board had listened to concerns about companies’ difficulties and had sought to restrict any rise.

He also revealed a quirk in the levy figures for 2012/13 which were set at only £550m, but are now estimated to be £630m – the same for 2013/14. This is attributed to a marked fall in the number of contingent assets being claimed by pension funds.

A more strident approach to verifying the legitimacy of such assets by the PPF has led to many schemes not renewing annual contracts on such assets.

“A lot of funds have thought again,” said Rubenstein. “It surprised us. When you allow for the fact that companies that have not recertified contingent assets, that has meant we have collected £50m more than we expected from that source alone.

“That tells you the risk in the system was understated and that by charging £630m we are allocating levy more fairly. The schemes that had been claiming contingent assets, which would now rather not, will be paying up for that risk.”