The Pension Protection Fund (PPF) has today confirmed its rules for the 2022-23 levy year. Broadly as consulted on in September, the main change is a 25% cap on the increase of a scheme’s risk-based levy (RBL) compared with 2021-22. This is intended to assist those schemes that have seen a significant worsening of their insolvency score as a result of the COVID-19 pandemic.
The consequence of this easement is that the PPF now expects to raise £390m, rather than £415m.
Previous proposals confirmed include:
The PPF’s further monitoring of insolvency data and company account filings indicates a “much less dramatic” levy band movement than their modelling had suggested 18 months ago. The PPF concludes that comparatively modest moves in levy band, coupled with improvements in scheme funding, mean that it continues to expect that more than 80% of schemes that pay a RBL will see it fall.
However, the PPF states that around 2% of companies have seen their levy band deteriorate by five or more bands. This is around 50% higher than the average in the PPF’s modelling data and around 25% higher than in the aftermath of the 2008 financial crisis. As the PPF’s reserves in their latest accounts had risen to £9bn, it considers it has sufficient flexibility to introduce the 25% cap to increases in the RBL. However, it reserves the right to disapply this cap where there is a “material change in the scheme’s circumstances (such as a material increase in liabilities of the scheme) or where the employer has had an insolvency event”.
The PPF expects to consult on the rules for 2023-24 in the autumn of 2022, as normal. These will incorporate the use of new asset classes as stated in the joint policy statement from the PPF and The Pensions Regulator in October 2021.
