Finance: Worries ease over pension levy

The Pension Protection Fund levy to be imposed on charities with final-salary pension schemes could be "manageable", according to the sector working party set up to deal with the issue.

Research conducted in the summer with leading charities indicated that the levy could hit the sector so hard that vital services would be lost.

But an assessment of the credit risk of several charities by agency Dunn & Bradstreet has assigned them very high ratings, which means they are likely to be at the lower end of levy rates when they are announced at the end of January. The Pension Protection Fund (PPF) has said employers judged most at risk could pay up to 100 times more than those perceived as least risky.

"All the big charities are likely to make the highest grade of rating," said Charles Nall, working party member and corporate services director of the Children's Society. "When they talk to Dunn & Bradstreet, their credit ratings generally shoot up to 100 out of 100, which is the score they should have."

The Children's Society has estimated that it would be levied £25,000 a year under the PPF regime. "In the context of a £40m organisation, that's not a big worry," said Nall. "It's manageable." Barnardo's expects to pay less than £120,000 annually.

The Charity Commission has been asked to provide data on charities with defined benefit pension schemes that have been wound up in the past 10 years. It is thought that a low number would boost the sector's case that charities are unlikely to leave pension scheme members high and dry.

"It is hard to think of a major charity that has gone bust, leaving creditors short, in the past 20 years, let alone one with a major defined benefit pension scheme" said Nall. "But it is clear that the burden of proof lies with charities and the Charity Commission is looking to see what data it can find."

But Nall added that if warnings that the PPF needs to raise £1.5bn rather than an original estimate of £300m prove correct, charities could have to close projects.

FACT FILE

- Charities with final salary pension schemes face a "manageable" Pension Protection Fund levy

- An assessment of the credit risk of a number of charities has assigned them high ratings, meaning they will be assigned lower levy rates

- Those most at risk could pay up to 100 times more than those seen as less risky, says the Pension Protection Fund.

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