The Pension Protection Fund (PPF) announced 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.
Alan Rubenstein, Chief Executive Officer of the PPF, commented: “We recently said in our Funding Strategy Update that we remain on course to meet our long term funding target of self-sufficiency by 2030, but substantial risks remain. We have therefore chosen to continue our approach from the first triennium in setting the overall levy rate for the coming year. This means we have sought to neutralise the wider levy changes, allowing the impact of improved funding to bring the quantum down. As a result we will seek to collect a reduced amount in 2015/16 in line with changes in current risk that we have seen. While the future is inevitably uncertain, levy estimates for the following two years appear likely to fall further rather than rise, based on the expected path of asset values and yields.”
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.
The PPF also published the draft Levy Rules today (Monday 6 October). As part of the consultation, the PPF is seeking specific feedback on the identification of secured charges which are immaterial and an extension to guidance in relation to ABCs. The consultation on the levy rules runs to 13 November 2014.
Alan Rubenstein concluded: “I am delighted to introduce our policy statement confirming that we will be moving ahead with the new model. The success criteria for the model were set by our industry steering group and we have further engaged with stakeholders and levy payers throughout the consultation, listened to their views and further enhanced the model. While there was interest in providing transitional protection to those schemes likely to see significant movements in levy from the new model, we believe that the improvements to the model, the cost to other schemes and its complexity justify not taking this proposal further. This view was shared by the majority of those who responded to the consultation on the issue.”
“We would like to make a final call for all employers and scheme advisers to be aware of the changes to the levy and what it means for them. We urge them all to log on to the portal to check their data – even if they have done previously, as the changes may affect some scores. We want all employers and pension scheme trustees to understand their scores and be appropriately prepared before the scores are used from 31 October 2014.”
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