PPF announces levy adjustment for 2020/21
The Board of the Pension Protection Fund (PPF) has confirmed the details of the 2020/21 levies they will invoice next year. This is broadly in line with the consultation issued in September, so the total expected levy across all schemes will increase to £620m, a £45m increase on the amount expected to be collected for 2019/20.
The PPF will allow schemes that would otherwise see an increase in levy as a result of GMP equalisation to submit additional information to offset the increase. Emily Sturgess, Head of PPF Solutions at XPS Pensions said “Sponsors that are showing a loss in their accounts solely due to accounting for GMP equalisation should consider submitting information to the PPF to avoid paying an unnecessarily high levy.”
Emily added, “The PPF has confirmed it is making changes to how it scores smaller companies and those that use the S&P model. Affected schemes should understand any impact on the levy and look to take other actions to mitigate any increase.”
The PPF is following the Bauer case which relates to the level of protection that member states must provide. Whilst this could potentially impact the level of PPF benefits and hence future levies, no allowance will be made in the 2020/21 levy. While it would be premature to make an allowance, it is worth noting the total levy estimate of £620m is close to the statutory maximum already.
Schemes and employers can take a range of actions to ensure the PPF levy they pay is appropriate. With bill increases on the horizon, now is a good time to review all actions, such as:
- providing an updated valuation to the PPF;
- submitting scheme specific information rather than letting the PPF make assumptions (for example on sophisticated asset strategies);
- checking the insolvency risk scores and looking for opportunities to improve the scores;
- checking whether the new GMP equalisation criteria applies; and
- reviewing the availability of contingent assets, particularly if a funding review is currently underway.