12 December 2011
- Determination confirms levy estimate of £550m, the lowest ever
- 2012/13 also first year of new levy framework
- New levy framework rules set for three years
- Guidance to schemes on what to do next also published
The Pension Protection Fund (PPF) today (Tuesday) published its final levy determination for 2012/13 which confirms the levy estimate for the year as £550 million, the lowest the PPF has ever set.
2012/13 is also the first year of a new levy framework which is aimed at making the levy more predictable and stable. It is intended that the rules governing this new framework will be set for the next three years.
PPF Chief Executive, Alan Rubenstein, said: “Now we have confirmed both the levy estimate for 2012/13 and the rules governing our new levy framework, it’s important that schemes know what to do next.
“Therefore, we encourage them to make sure their scheme returns to the Regulator are as correct as they can be - and the data they supply Dun & Bradstreet to calculate their insolvency scores is accurate and up-to-date.
“Also, they should think carefully about how the new investment risk factor will be taken into account in their final levy bill as well as put in place any measures that may reduce that bill.”
To help schemes in all this, the PPF has published today investment risk, contingent asset and block transfer guidance as well as levy practice guidance. Further help and advice can be found on the 2012/13 Determination page.
Key activities that schemes are encouraged to consider are attached to this press release, as well as key deadlines.
1. The Pension Protection Fund was set up under the provisions of the Pensions Act 2004 in April 2005 and is classified as a public financial corporation. It has been established to pay compensation to members of eligible defined benefit and hybrid pension schemes when there has been a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation.
For further press information contact: Richard Hunt on 020 8633 5931/0789 425 5561 or Ana Moreno on 020 8633 4932/ 07961 957 480
KEY CONSIDERATIONS FOR TRUSTEES AND ADVISORS
Schemes should make sure that the information they provide in their returns to the Pensions Regulator’s Exchange system are as accurate and as up-to-date as possible.
Scheme returns were sent out from Monday 5 December.
2. Dun & Bradstreet
Schemes should also make sure that the information they provide Dun & Bradstreet (D&B) is also as accurate and up-to-date as possible so that the assessment of their insolvency risk is correct.
It is important to remind schemes that D&B are measuring insolvency risk throughout 2011/12 and these measurements will feed into the 2012/13 levy calculations. This is in contrast to previous years when the measurement was a year in advance.
3. Investment risk
Investment risk will be included in the levy calculation for the first time in 2012/13. Therefore, schemes should pay close attention to the assets details that they input into Exchange as this information will be used to calculate investment risk.
For instance, taking the time to establish what the asset split is in pooled funds can lead to a significant levy reduction.
Schemes with liabilities of £1.5 billion or more will have to make their own assessment of investment risk. For other schemes, it is optional so trustees and advisors may want to consider the value of doing their own assessments. Guidance to help them do this is available on the 2012/13 Determination page.
4. DRCs and contingent assets
Schemes can still consider using deficit reduction contributions and putting in place contingent assets to help reduce their levy bills.
From 2012/13 trustees certifying new and existing contingent assets will need to make a certification in respect of the guarantor(s) financial strength. The PPF will also be carrying out analysis to ensure the recognition in the levy is appropriate given the financial strength of the guarantor.
More information on both of these is contained in the guidance issued alongside the levy rules. The certification, in particular, has been adjusted to take account of comments in the recent consultation, but it may still be the case that some existing contingent assets cannot be recertified or need to be recertified for a different amount
Monthly D&B Failure Scores
Between 28 April 2011 – 30 March 2012
Final submission of scheme return information on Exchange
by 5pm, 30 March 2012
Reference period over which funding is smoothed
5-year period to 30 March 2012
Certification of contingent assets
by 5pm, 30 March 2012
Certification of deficit reduction
by 5pm, 10 April 2012
|Certification of full block transfers
||by 5pm, 29 June 2012|
||starts Autumn 2012 |