The Pension Protection Fund (PPF) has proposed improvements for the 2011/12 levy year which reflect changes to the Dun & Bradstreet (D&B) methodology, used to measure insolvency risk for the PPF, and industry feedback.

In a bid to improve the way the PPF assesses the insolvency risk for sponsoring employers of pension schemes that pay the levy, the PPF has published proposals which would also see a new attribute, called 'nationwide', introduced to businesses with three of more branches in different UK regions, therefore assessing them as a national rather than regional employer.

PPF-compliant contingent assets will be excluded by D&B in their scores also, as they do not reflect the financial position of the employer, but instead of the pension scheme. The failure score of a subsidiary with a parent company at substantial risk of insolvency will be that of the parent company, and finally, those employers seeking to change their industry sector or geographical region will need to provide evidence to support that change.

"Measuring the insolvency risk of the 20,000 sponsoring employers of schemes we protect is a complex task - and we need to have a system which accurately reflects the risks posed by a range of different employers, commercial and non-commercial, large and small, UK and foreign," commented PPF chief executive Alan Rubenstein.

"We have shown in the past we are prepared to make changes to the way we do this.

"We work continually with D&B to make sure that failure scores, and the risk of insolvency we associate with these, remain appropriate. D&B have reviewed their methodology and insolvency probabilities in light of the significant economic changes that have taken place in the last year or so. Therefore, we thought it timely to asses D&B's review and address the issues raised by industry about insolvency risk measurement."

These changes will be consulted on by the PPF now, since they relate to failure scores which will take effect from 31 March 2010. A further consultation will take place next year once the levy scaling factor is available for the 2011/12 determination, although the PPF said it does not expect to see any major policy changes.

Share Story: