The Pension Protection Fund has today published its consultation for the 2022-23 levy (to be invoiced in 2022); perhaps best summarised as ‘steady as she goes’. The PPF expects to collect £415m, down £105m from 2021-22, with around 82% of schemes that pay a risk-based levy predicted to see a levy reduction.
Although the PPF states that financial uncertainty remains, its strong funding position and better than expected economic outlook in the wake of the COVID-19 pandemic – with fewer insolvencies than had perhaps been feared – leads it to conclude that there is no need for significant change from last year. That said, the PPF remains concerned about the future economic impact, with the possibility of significantly higher claims a key concern, as the Government’s support package reduces.
Consequently, the Levy Scaling Factor and Scheme Multiplier remain at last year’s levels of 0.48 and 0.000021 respectively and the risk-based levy cap remains at 0.25% of scheme liabilities. Similarly, the D&B insolvency risk model basis remains in line with that used since April 2021, with the mapping of credit ratings to levy bands revised as trailed in the PPF’s January 2021 policy statement. However, with economic recovery being dependent on various uncertain factors, the PPF states that it will “continue to monitor model performance closely and on a regular basis”. Moreover, the PPF proposes changes to the treatment of employers that enter a moratorium or restructuring plan to reflect more closely their stressed nature rather than continuing to score them on the basis of prior accounts.
In calculating the liabilities for the levy, the PPF is adopting the A10 assumptions guidance, effective for s179 valuations since 1 May 2021, which is typically expected to reduce schemes’ levies.
Guidance for consolidators and schemes without a substantive sponsor is to be amalgamated into a single appendix along with widening the definition, although the PPF seeks views on the extent to which such schemes currently exist and how these may evolve.
Easements introduced in summer 2020 to allow additional flexibility for paying invoices for schemes adversely impacted by COVID-19 will remain for 2022-23.
The PPF has also confirmed that it intends to update its s179 valuation guidance later in the year in order to clarify the position relating to the disapplication of the compensation cap in wake of the Court of Appeal’s judgment that it is discriminatory on the grounds of age.
The deadline for responses is 5pm on 9 November 2021.
