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Pension Protection Levy 


The pension protection levy is one of the ways that the PPF funds the compensation payable to members of schemes that transfer to the Pension Protection Fund.

These pages contain information about who has to pay the levy, how it is calculated, how schemes can reduce their levy, and the invoicing process.

 

24 October 2014: PPF Levy Consultation 2015/16

We would like to draw your attention to some minor changes to our recent levy Policy Statement and to remind you about important upcoming deadlines.

Stakeholders are reminded that the PPF Levy Consultation for 2015/16 Levy Year closes at 5.00pm on Thursday 13 November. You can see an interview with Chris Collins, PPF Chief Policy Advisor, on the Pensions Management Institute (PMI) website.

We would also encourage schemes to check their insolvency risk score at https://www.ppfscore.co.uk/. Experian will include any data obtained or submitted (in accordance with the data hierarchy) to them by 31 October for the end of October scores. After this they will base scores on data filed with Companies House (or other permitted source) or provided to Experian a month before the end of the month being scored. 

We have identified the need for some minor amendments to the Policy Statement and other documents published on 6 October and have made the following changes:

(i) Policy Statement – Chapter 7 – Asset Backed Contributions (ABCs) (7.4.3). The Policy Statement explains that coupon payments made after the most recent s179 valuation, up to the date of the latest accounts, will be credited if reported on the voluntary certificate. This remains correct but the description of how they are credited is not completely accurate. The payment will be deducted from the Underfunding total, rather than ’added to scheme assets when calculating underfunding’.

(ii) Policy Statement – Chapter 3 – PPF specific model (3.3.6). This part of the document covered the changes made to adjust u-shaped variables. The original drafting included incorrect thresholds for the point below which two of the coefficients are constant. In the case of Sales per Employee in the Large and Complex scorecard the threshold has been amended to any value lower than £87,500, rather than lower than £100,000. For the Acid Test in the Independent Small Account scorecard the threshold has been amended to any value of the ratio lower than 0.75 rather than 0.8. This is now consistent with the draft Levy Rules as published with the consultation document

(iii) Contingent Asset Guidance – Appendix 2 – Example Contingent Asset Certificates. The draft Contingent Asset Certificates will be added shortly to the Contingent Asset Guidance.

(iv) ABC Certificate – the originally published certificate did not include the ABC value box.

(v) Type C (ii) Contingent Asset Agreement – has been updated to allow for surety bond agreements in line with the consultation proposal.

 

 

6 October 2014 Pension Protection Levy Statement and Consultation  (please note subsequent updates above)

The Pension Protection Fund (PPF) announced today (Monday 6 October 2014) that the levy estimate for 2015/16 would be set at £635m, nearly ten per cent lower than the 2014/15 estimate.
The levy estimate was published as the PPF announced the proposed levy rules for 2015/16 following its consultation that ran between May and July this year.

The recent consultation on the PPF’s plans for the levy, over the next three years, attracted the highest number of responses to a consultation since 2005/06. There was strong stakeholder support for the move to Experian (the PPF’s new insolvency risk provider) and the new PPF specific model for assessing insolvency risk, confirming the PPF approach. All feedback was considered carefully and some changes have been implemented to further enhance the proposals.

The enhancements include:

  • amended rules on how the model reflects mortgages – ensuring mortgages that are not relevant to insolvency risk are excluded
  • A revised approach to  asset backed contributions (ABCs) – the PPF will now recognise all asset types not just UK property, provided the ABC is valued in a way that reflects the value to the PPF in the event of insolvency.

View the statement and consultation and the draft determination. The Determination and its additional documents, including appendices, revised standard contingent asset forms, guidance on ABCs and mortgage certificates can be found on the 2015/16 Determination page.

 

 

The documents below were published earlier in 2014.

 Document Details
Consultation on the second PPF Levy Triennium – 2015/16 to 2017/18

This consultation document sets out our plans for the pension protection levy over the next three years. 

 

Combined Annex to the Consultation

 

Includes definitions and scorecards, impact analysis, and example calculations and voluntary certificate.

Draft Determination 2015/16 - Extracts 

 

 

Draft Determination 2015/16 - ABC Appendix

 

 

Draft Determination 2015/16  - Insolvency Appendix 

 

 Experian Report - Developing a specific measure of insolvency risk for the Pension Protection Fund

 

The purpose of this paper is to document the creation of the PPF-specific Insolvency Risk Score created by Experian for the sole purpose of providing the PPF with an objective evaluation of the likelihood of any given eligible scheme employer or guarantor becoming insolvent during the next 12 months.

 PWC Report - Model Validation

The purpose of this report is to provide an independent review for the PPF on the Experian model.

 

Barnett Waddingham Report - Understanding the Impact of Change in Insolvency Risk Model

This report is intended to give an indication of the companies that are likely to see an improvement or worsening in relative insolvency risk score resulting from the differences between the Dun & Bradstreet failure score model (used prior to April 2014) and the PPF-Specific Insolvency Risk Model.

 

Webinar with the PPF and Experian

 

47-minute video with key figures from PPF and Experian explaining the key issues behind the levy proposals, and taking questions.
Webinar Q&As

 

Answers to questions that were submitted during and after the webinar.

 YouTube video - Martin Clarke

 

Our Director of Financial Risk summarises the main points of the consultation in a three-minute video.
 YouTube video -  Chris Collins

Our Chief Policy Advisor looks at the key issues in more detail.

 

 

 

The following links may also be useful for further information on the levy:

Details  Page/Document

On 17 December 2012, the PPF published its Policy Statement on the 2013/14 levy. This was accompanied by the Levy Rules and appendices,  guidance on levy practice, block transfers, bespoke investment risk calculation and contingent assets. standard form contingent asset agreements are also on this page.

 

Levy Determination 2013/14

This booklet, produced by the PPF and CBI, explains how the levy works. It also sets out the actions you can take to reduce your individual levy bills and the deadlines you must meet to make sure these actions are taken into account.

How to Reduce Your Levy

This page contains links to all levy-related documents going back to 2005. Some of these documents have been superseded and are included for historic interest.

All Levy Documents