Underfunding is a key element in the calculation of the risk-based levy, and represents the potential size of a scheme's claim on the PPF.
U is the amount of underfunding (liabilities less assets) using the scheme’s transformed assets and liabilities taking account of any relevant valid contingent asset arrangements and deficit reduction contributions.
In the great majority of cases U has been calculated including the impact of stressing assets and liabilities.
U = L – A – D
D = Deficit-Reduction Contributions
U has been further reduced by the value of any recognised Type B (Vb) and Type C (Vc) Contingent Assets. If the calculation resulted in a negative amount, zero has been used.
In a small number of cases, for technical reasons, using stressed assets and liabilities would serve to actually improve the funding position of the scheme. Where this is the case, then the
unstressed deficit is used instead and this will be highlighted on your invoice. Part D of the Levy Rules provides further information on this part of the calculation.