On 29 September 2020, the Pension Protection Fund (“PPF”) published a consultation containing proposals on the rules that will be used to calculate the 2021/22 PPF levies to be issued in 2021.
Some of the key proposals being consulted on are:
- Setting the levy rules for 2021/22 and 2022/23 on a yearly basis – rather than being fixed for the next three years as would normally be the case.
- The introduction of a small scheme adjustment (“SSA”) – this will be in the form of a 50% reduction to the (uncapped) risk-based levies of schemes with PPF liabilities up to £20m. Schemes with PPF liabilities greater than £20m will also have a SSA applied but the adjustment will taper down to zero for schemes with liabilities of £50m and above.
- A reduction in the risk-based levy cap from 0.5% to 0.25% of liabilities – this reduction will apply to all schemes regardless of size and could see a scheme’s levy halve if they were already capped.
- Whether to continue to offer extended payment terms for the 2021/22 levy invoices – this year, subject to the submission of information to the PPF regarding the impact of COVID-19, levy payers have been able to increase their payment terms from 28 days to 90 days.
The PPF says that the impact of these proposed changes is projected to reduce the total levy collected in 2021/22 to £520m – a reduction of £100m on the equivalent figure for 2020/21. The PPF considers itself to be in a robust financial position with extensive hedging of its risks and so is comfortable with this reduction in its projected levy collection.
In addition to the above the consultation is also seeking views on:
- Continuing to use Dun & Bradstreet’s (D&B) PPF-specific insolvency model without any changes despite the Covid-19 pandemic.
- Ultimate parent identification for companies with complex structures.
- Changes to consultation response system.
- The electronic issuing of levy invoices.
- Whether changes should be made for the 2022/2023 levy rules particularly in light of the Corporate Insolvency and Governance Act.
- Amendments that could be made to the levy rules to capture the impact of consolidators and other end-game solutions.
The consultation runs until 5pm on Tuesday 24 November 2020 and the PPF expects to publish its response in early 2021. The PPF has given respondents the option of a quick or full response to the consultation. The quick response submission is designed to only take 10 to 15 minutes to complete.
The full consultation can be found here.
1 October 2020