In March 2017 the PPF launched a consultation on how the PPF levy will be calculated for the next three years. They have recently confirmed the outcome of this consultation and commenced a second round of consultation. Key points include:
Total levy to reduce by 10%
The total levy estimate for 2018/19 will be £550 million, which is 10 per cent lower than 2017/18 (£615 million). This reflects an improved funding position within the PPF. In isolation this will reduce all PPF levies by about 10%.
The PPF have published estimated values for the Levy Scaling Factor and the Scheme-based Levy Multiplier to implement this reduction.
Proposed insolvency calculations adopted
The revised approach to assessing insolvency risk from the first consultation will be adopted largely unchanged. This includes the use of public credit ratings where available and the Standard and Poor’s model for regulated financial institutions. Employers can see their score under the new model at www.ppfscore.co.uk.
The insolvency risk used in the 2018/19 PPF levy calculation will be a six-month average from October 2017 to March 2018. If employers need to correct any data held by Experian they should therefore do this as soon as possible.
The PPF have also updated how insolvency scores feed into the levy calculation. The PPF propose to increase the levy payable by employers in the lowest insolvency bands, with a levy increase of about 50% for employers in the lowest band.
Smaller employers to benefit most
The PPF’s impact assessment shows nearly two in three schemes will pay a lower levy under the new proposals. Small employers are expected to be particular beneficiaries, with levies down by a third overall. The largest employers will generally see an increase in levies to more closely reflect their estimated insolvency risk.
Smaller schemes will also benefit from simplified certification of Deficit Recovery Contributions, making it easier to gain credit for recovery plan payments made to schemes.
Second round consultation
The PPF is also seeking views on some additional proposals, including the levy cap applied to the schemes with the weakest sponsors. The second round consultation will run from 27 September until 1 November and the final levy rules for 2018/19 will be published in December.