· Levy estimate for 2018/19 will be £550 million, 10 per cent lower than 2017/18 (£615 million)
· PPF publishes consultation on draft levy rules for 2018/19 and confirms implementation of improvements to insolvency risk assessment – including the use of credit ratings
· PPF also seeks views on a small number of additional proposals
· Impact assessment shows nearly two in three schemes see reduced levy under the new proposals. SMEs are expected to be particular beneficiaries – with levy charged to SMEs down by a third overall
· The consultation will run from 27 September until 1 November and the final levy rules for 2018/19 will be published in December
The Pension Protection Fund has today announced that it has chosen to set its levy estimate (the amount it is seeking to collect) at £550 million for 2018/19 – just over 10 per cent lower than the £615 million estimate for 2017/18.
Alongside this announcement, the PPF confirms it will implement the majority of proposals consulted on in March for the third levy triennium with limited change.
These proposals build on the success of the PPF-Experian model for assessing insolvency risk and include: the use of credit ratings and the Standard and Poor’s credit model for regulated financial institutions; as well as important developments to the PPF-Experian model e.g. ensuring all scorecards are tailored to company size.
The PPF is also seeking views on a small number of additional proposals including to improve its assessment of scheme underfunding.
Collectively these changes will improve the risk reflectiveness of the levy. If these rules were in place now around two in three schemes would have seen a lower 2017/18 levy, with around one in five schemes seeing an increase. SMEs would have seen an aggregate fall in levy of around a third.
The PPF will be consulting on the new proposals and the draft levy rules for 2018/19 from 27 September to 1 November.
David Taylor, General Counsel at the PPF, commented: “When we set out our initial proposals for the next three years we noted the particularly challenging environment in which the PPF is operating. Six months on, a high degree of political and economic uncertainty persists and scheme deficits remain high.
“However, while the risks we face are significant, we’re in a strong financial position and we’re still on track to meet our long-term funding target. As a result, we’re been able to set a levy estimate for 2018/19 that is 10 per cent lower than last year. In doing so we have, as always, sought to recognise levy payers’ desire to limit costs while maintaining an appropriate level of protection given the risks we face.
“Of course, an individual scheme’s levy will depend not just on the aggregate amount we aim to collect but also on movements in the risk it poses to us. We’ve always sought to make our levy calculation methodology reflect that risk as well as we can.
“We’re grateful to all the stakeholders who responded to the consultation earlier this year, and to our industry steering group. The ongoing support and engagement of levy payers is immensely important to us.”
After the levy consultation closes on 1 November, the PPF will finalise the rules and publish the levy determination in December.
The PPF will host a webinar on Monday 16 October to explain the detail of today’s announcement and provide an opportunity for levy-payers to ask questions. Further information on how to register for the event will be available shortly.
As indicated in the March consultation document, the PPF intends only to use scores collected between 31 October 2017 and 31 March 2018 for the 2018/19 levy year. The PPF encourages pension scheme trustees and employers to log on to view and check their data and scores at www.ppfscore.co.uk from early October.
The consultation document can be found here
The Pension Protection Fund:
The Pension Protection Fund protects millions of people throughout the United Kingdom who belong to defined benefit pension schemes. If their employers become insolvent and their pension schemes cannot afford to pay what they promised, the PPF will pay compensation for their lost pensions. Tens of thousands of people now receive compensation from the PPF and hundreds of thousands more will do so in the future. The PPF is a public corporation, set up by the Pensions Act 2004, and is run by an independent Board.
For further press information contact:
PPF Press Office
020 7566 9775