The Pension Protection Fund (“PPF”) published the final rules for the 2016/17 PPF Levy on 17 December 2015. As expected, the rules for 2016/17 are substantially the same as 2015/16 reflecting the PPF’s desire to maintain stability of methodology.
Following feedback, the PPF have made some slight technical changes relating to the 2016/17 levy:
- Many mortgage exclusion certifications can be carried forward from last year. Only immaterial mortgages will need to be recertified
- Rules on refinancing mortgages have been clarified.
- There will be a lighter touch to recertification for Asset Backed Contribution arrangements.
- New companies will be able to submit interim accounts.
The levy scaling factor and the scheme based multiplier will be 0.65 and 0.000021 respectively and are those proposed in the PPF’s consultation on the 2016/17 levy in September 2015. The final levy determination is largely unchanged from this consultation which my colleague Alan Collins discussed in his blog “What’s in store for PPF levies?”.
Successful PPF levy management requires early action and regular monitoring.
- Employers should continue to regularly monitor their Experian score via the Experian portal as the final Experian risk rating used for the levy is a 12 month average of the scores to 31 March.
- They should consider if they have the appropriate risk reduction measurements in place. For example, would it be appropriate to put in place a contingent asset or pay in additional contributions?
To avoid any unwanted surprises on your invoice it is recommended that schemes take a managed approach to their PPF levy, understanding what their levy is estimated to be and quantifying the impact of potential levy risk reduction options. There are tools and services available which can estimate your levy in advance of the next invoicing cycle and this will assist with your cash-flow forecasting and budget planning, as well as highlighting whether there is a need to take any levy mitigation actions in advance.
The deadline of midnight on 31 March 2016 is fast approaching by which an employer or guarantor must have submitted the relevant information they wish to be taken into consideration for the calculation of their 2016/17 PPF Levy invoice. It is important that your scheme information on the Pensions Regulator Exchange is up to date by the deadline. The exceptions are Deficit Reduction Contribution Certificates which must be submitted by 5pm on 29 April 2016 and Certification of Full Block Transfers which must be completed by 5pm on 30 June 2016.
If you would like more of an understanding of what your autumn levy invoice is likely to be or are looking to proactively manage your PPF levy, please contact your usual Spence & Partners consultant, or Richard Smith, head of our corporate advisory services.