A routine Hughes Price Walker induction audit during the transfer of administration of a Group Pension Scheme has saved one UK engineering company thousands of pounds.

New procedures in the way the Government calculates how much each eligible pension scheme should contribute to the Pension Protection Fund came into force in April 2007, potentially with significant consequences for 'multiple employer' Pension Schemes.

The fee levied by the PPF from each Scheme is calculated according to a number of factors, one of which is a risk-based levy, a method of assessing the likelihood of a company's insolvency. Up until April 6th this year, the calculation for a multiple employer Scheme was relatively straightforward, basing the probability of insolvency of all the employers on that of the largest. However the new legislation requires that every employer now be assessed individually and the amount paid across a Group Scheme is now calculated by totalling each liability.

For one UK engineering group, who had been unaware of the implications, this could have meant an increase of some 40,000 per annum in levy charges, despite operating what are relatively small schemes.

Just weeks after appointment and just weeks before the deadline for submitting the necessary PPF Valuation Certificates, Hughes Price Walker spotted the oversight as part of a standard induction HealthCheck, which includes a full audit of current and previous compliance procedures.

Explains HPW Partner, Ray Hughes, "In this case the Managing Director had believed the Holding Company Scheme was automatically liable should there be any problem with a subsidiary and no one had informed him of the change in legislation."

Two weeks later and HPW had helped put in place the necessary guarantee for the holding company, as the major employer, to make good any shortfall should any other of the employers because insolvent. This was a key factor in determining the amount of the eventual levy, and, as well as formalising security for all pension fund members, achieved a significant saving for the Group Scheme as a whole.

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