The government has rejected a call to alter legislation on interest rates for late payment of Pension Protection Fund (PPF) levies for small and medium enterprises (SMEs), made by Work and Pensions Committee (WPC) chair Frank Field.
In a letter to Pensions Minister Guy Opperman, Field detailed that the WPC had “heard concerns” that the interest rate of 5 per cent, plus the Bank England base rate, was “too high” and was “placing an unduly heavy burden on small businesses”.
He draws the comparison with the interest rate levied by HMRC for late payment of taxes, 3.25 per cent, and explains that the payment deadline of four weeks creates “an obvious cash flow problem, especially for small businesses”.
Field also suggested that payment by instalment would help alleviate the cash flow issues and the government should grant the PPF the power to limit payment by instalment to just SMEs.
However, Opperman rejected the suggestions, claiming that “the level at which the current interest rate is set has succeeded in fulfilling the purpose for which the decision to implement it was made in the first place”.
Opperman cited that, since the introduction of interest on late payments, the average time taken by schemes to pay has reduced from 34 days to 24 days.
In response to the instalment suggestion, Opperman said that, although he agreed the amendment would help “alleviate the burden” on SMEs, there is “not sufficient evidence to support the case for a change in the current regulatory framework”.
Despite this, Opperman’s response details that he has “received confirmation that the PPF will continue to research the issue in order to build a fuller evidence base”.
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