PPF announces supportive measures for levy payers

The Pension Protection Fund (PPF) has outlined a number of supportive measures for levy payers in 2021/22 following its consultation.

Schemes with less than £20m in liabilities will have their levies halved, with the levy adjustment tapering for schemes with between £20m and £50m in liabilities.

The risk-based levy cap will be reduced from 0.5 per cent of liabilities to 0.25 per cent.

The PPF confirmed it will continue to measure insolvency risk using credit ratings and the PPF-specific insolvency risk model operated by Dun & Bradstreet.

It also confirmed the levy estimate of £520m for 2021/22 and that the levy scaling factor of 0.48 per cent will be retained.

The levy estimate represents a reduction of £100m compared to this year’s levy. However, the PPF warned that it expects to see a worsening in insolvency scores, which could impact the levy estimate for 2022/23.

“I’m delighted that our levy payers and industry stakeholders overwhelmingly supported the proposals in our recent consultation,” said PPF executive director and general counsel, David Taylor.

“We are therefore confirming key decisions now which we hope will help schemes plan for next year.”

The PPF stated that it received “overwhelming backing” for the proposals it outlined in its consultation, which was published in September.

Its newly-announced measures aim to support levy payers that plan to implement risk reduction measures, which could reduce the amount of levy they pay before the 31 March.

Taylor continued: “We hope that these measures will help with affordability while preserving a levy that is risk-reflective and incentivises measures to reduce risk.

“In this difficult year the protection we provide has never been more important. The levy schemes pay is a vital source of funding which allows us to protect members of defined benefit pension schemes in challenging times as well as good.”

The pensions lifeboat will maintain its current rules for levying superfunds, but will monitor market developments and is considering using a ‘hybrid’ methodology in future levy years for arrangements that have similar characteristics.

The 2020/21 levy was invoiced in autumn 2020 and over 97 per cent has been received, although a “small number” of schemes have taken up the flexibilities the PPF has offered through the Covid-19 easement and payment plans.

The review of the PPF’s funding strategy is planned to take place in 2021/22 and will inform the setting of the 2023/24 levy.

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