The Pension Protection Fund admitted yesterday it has been forced to delay an announcement of how much money it will need to raise next year, prompting an angry response from companies waiting to hear how much they must pay.
The compensation fund, set up to protect workers who lose retirement benefits when their companies go bust, said it would not be able to announce the size of its levy on final-salary pension schemes until the second half of January. The PPF had promised to set the levy by the end of this month but has consistently been dogged by controversy over how costs should be calculated.
Lawrence Churchill, the PPF chairman, said: "The complexity of the work involved has been significantly greater than expected." He said the PPF would give an update of its work on 16 December that would "be sufficient for [companies] to put their planned actions into effect".
But Stephen Yeo, a partner at Watson Wyatt, the UK's largest adviser to final-salary pension schemes, warned the update would not give employers sufficient information for their budgeting plans. "It's very disappointing given the uncertainty about the size of the levy," Mr Yeo said. "How can people plan to take any action until they know what it is going to cost?"
In addition to anxiety about the total value of the levy - estimates of the PPF's needs in 2006-7 range from £300m to £2bn - it is also unclear how the bill will be shared by individual companies. Companies will be charged on the basis of their financial strength and how securely their pension funds have been funded, but the PPF was forced last month to make last-minute reforms of the criteria it uses to judge these standards. Despite the changes, international companies fear the PPF - whose chief executive is Myra Kinghorn - will not take sufficient account of the financial strength of parent operations when looking at the solvency of their UK subsidiaries.
At the weekend, Nestlé, the giant food and drink firm, said it feared its UK operation would face a £12m bill on this basis, rather than the company's original estimate of £300,000. Nestlé said it might move production from a factory in York to an overseas location to cope with the higher costs.
The mobile phone company T-Mobile, which is owned by Germany's Deutsche Telekom, also said that it feared a large increase in its PPF bill next year, compared with the flat-rate premium all companies were asked to make in 2005.Reuse content