The Pension Protection Fund (PPF) will set on March 31 the levies UK companies must pay in 2006-2007. According to Aon Consulting, a pension, benefits and HR consulting firm, UK companies are running the risk of seeing their levies rocket severely if they do not take action immediately to control their credit ratings.
“There are many factors that influence company credit ratings and prompt bill payments are one of them,” said David Stewart, senior consultant and actuary, at Aon Consulting. “Our main concern is that companies are failing to realize the huge implication that unpaid bills, even those of nominal amounts, will have on their PPF Levies.”
PPF levies will be determined by an individual company’s credit rating, or financial security, as it stands on and will apply for the following twelve-month period.
According to Aon, failure to pay bills for as little as a few hundred pounds could mean the levies could be up to four times greater than if companies had paid their bills earlier. This is due to the fact that credit ratings are heavily impacted by a company’s trade experience with wholesalers and suppliers and any outstanding payments or county court judgements (CCJs) suggest the company is more likely to become insolvent in the next year.
“I am aware of a number of companies that are expected to have reduced their levy by more than 75% as a result of paying a few small outstanding bills,” Stewart said. “For a scheme with liabilities of 400m this could result in a levy reduction of more than 1.5m.”