‘Unfair’ Pension Protection Fund price hike for co-ops

Co-ops that pay into the Pension Protection Fund (PPF) are about to be hit with a hike in their costs, a change which Co-operatives UK describes as “massive and unfair”.

Experian, the PPF’s insolvency risk provider, uses asset data collected from Companies House to calculate an organisation’s insolvency risk. However, most co-operatives and mutuals register with the FCA Mutuals Team, not Companies House. As a result of Experian not having data on recent charges on mutual societies’ assets, these societies are given a scheme average ‘neutral’ mortgage age score as part of their overall insolvency risk.

According to Co-operatives UK, this move to a neutral scoring is, in practice, ascribing a higher overall risk of insolvency on the live scorecard of some mutual societies. These societies are expecting their next PPF levy to double, representing more than £2m in increased costs for just six co-operatives in this coming year alone. The issue is also affecting a number of building societies.

“The position of these employers has not become riskier by the PPF’s calculations; rather the data to make these calculations is not being collected,” said James Wright, policy officer at Co-operatives UK.

“This is one of those unintended consequences of being a mutual in a complex system that remain hidden until they suddenly start costing millions. We see negative institutional bias and unfair burdens for co-ops across the whole workings of government. That’s why co-ops need to pull together on the broader strategic issues.”

Co-operatives UK is currently lobbying the PPF for a work-around on mutual society mortgage age data and is asking the FCA to improve mutual society data. As a result of this lobbying, the PPF is looking into its data collection policy and process ahead of its annual consultation. According to the Co-operatives UK, the FCA Mutuals Team is also eager to improve the Mutuals Register and is being spurred on by this matter, although funding is an issue.

Mr Wright said that Co-operatives UK, through its lobbying, would like to achieve a work-around from the PPF and Experian so that society mortgage data can be taken into account, and fair risk evaluation for societies be based on actual business fundamentals.

“We want this resolved in this annual PPF policy cycle so it doesn’t cost our members so much next year,” he added. “If your co-op pays into the Pension Protection Fund we urge you to check whether Experian has started ascribing a higher insolvency risk score which you don’t agree with. If it has we would very much like to hear from you and ask that your co-op supports our collective action.”

In the longer-term, Co-operatives UK would like to see “significant improvements to the Mutuals Register on a par with Companies House Beta”, with free, easy to access, up-to-date data, and a review of whether it is economical for government to run a separate Mutuals Register that can’t match Companies House in service provision.

This isn’t the only issue for co-operatives that arises from the fact they file with the FCA Mutuals Team rather than with Companies House. Society data is far more costly to access and less usable than company or Community Interest Company (CIC) data which makes it harder for financial services, other businesses or the public to find out about them – and it currently takes a long time for public data to be updated after a society files something significant.

“Some government and non-government schemes will also stipulate that businesses must be registered with Companies House in their eligibility criteria – so societies are excluded by default,” said Mr Wright.

During Co-operatives Fortnight (18 June – 2 July), Co-operatives UK is encouraging co-ops to sign up in support of a campaign to overhaul policy making for co-ops, and is asking for input at www.uk.coop/bis-move. The organisation believes that because responsibility for co-operatives is scattered across government departments, its members are not on a level playing field with other businesses, and argues that the single most effective way to address this is to transfer responsibility to the department for business.

• If there are any Co-operatives UK members that are experiencing a rise in their levy, they can email [email protected].