The Pension Protection Fund (PPF) has announced proposals to improve the way it assesses insolvency risk following the news last week that its funding deficit has more than doubled in the last year.

Under the proposals for the 2011/2012 pension protection levy year, the PPF will improve how it judges insolvency risk for sponsoring employers of pension schemes that pay the levy.

According to the PPF – which compensates members of eligible defined benefit pension schemes in the event of an employer’s insolvency – the proposals reflect industry feedback and a review of methodology and insolvency probabilities carried out by Dun & Bradstreet (D&B).

Commenting on the proposals, PPF chief executive, Alan Rubenstein says that measuring the insolvency risk of the 20,000 sponsoring employers of schemes the PPF protects is a “complex task”.

“We need to have a system which accurately reflects the risks posed by a range of different employers, commercial and non-commercial, large and small, UK and foreign.

“We have shown in the past we are prepared to make changes to the way we do this,” he said.

Mr Rubenstein continued by saying that as a consequence of “significant economic changes in the last year or so” D&B have reviewed their methodology and insolvency probabilities to ensure that failure scores, and the risk of insolvency associated with these “remain appropriate”.

© Fair Investment Company Ltd