The PPF have issued their annual consultation document on the levy for 2016/17. As the overall policy is to keep the levy as stable as possible for three years at a time, and 2016/17 will be the second year of the current levy triennium, few changes are proposed.
Overall, the total levy collected in 2016/17 is expected to be £615m, compared to £635m for 2015/16. This change is not considered significant and therefore the levy scaling factor and scheme-based levy multiplier will not be changed.
The reduction in total levy reflects improvements in the Experian scores. For example, the levy bands were originally designed so that 20% of employers would fall in the top band. In fact, 29% of employers were in this band for purposes of the 2015/16 levy. The reduction in total levy is partially offset by deterioration in scheme funding caused by the fall in gilt yields.
The changes proposed, which mainly aim to simplify processes and improve practical elements of the rules are as follows:
– Most mortgage exclusion certificates which were submitted last year will continue to be valid. Only immaterial mortgages will need to be recertified. Rules on Refinance mortgages will be clarified.
– The exchange rate used for accounts not published in sterling will be the rate in force at the date of the accounts.
– Companies who voluntarily provide Experian with full accounts will be able to provide previous years’ accounts for use in trend variables calculations.
– The guidance on contingent asset certification has been updated to include the material published in February 2015 on how to consider the strength of a guarantor.
– Where an employer does not receive an Experian pension protection score, an average of the scores of the other employers connected to the scheme will be used where more than 50% of scheme members are in scored employers.
The PPF have also confirmed that they are investigating the impact of the introduction of FRS102 on company accounts and subsequent effect on Experian ratings. The inclusion of annuities in scheme accounts will be allowed for.
Consultation closes on 22 October 2015, with the final levy determination to be published in December 2015.
Katherine Ball – Principal Consultant & Actuary