PPF levy 2021/22: deadlines are approaching

• United Kingdom

• Pensions

09-02-2021

In its latest levy rules consultation, the PPF (the UK’s pension lifeboat fund) said its focus was on “striking the right balance” between the levy amount it needs to collect and the immediate challenges faced by employers and schemes given the COVID-19 pandemic.

The PPF has now published its final levy rules for 2021/22, together with accompanying documents. Schemes should take careful note of the PPF’s finalised levy submission deadlines. Note also that additional actions may now be needed to certify existing PPF contingent assets where a guarantor is based in the EU or EFTA.

Levy rules for 2021/22– what are the key points to note?

The key points to note are:

• 2021/22 levy estimate: the expected total levy is £520 million. This is £100m lower than last year’s levy estimate. The PPF says this is because of its strong financial position at the beginning of the COVID-19 pandemic
• small scheme adjustment: this is new and will cut the levy by 50% for small schemes with less than £20m in liabilities (and tapering this relief so only schemes with £50m+ in liabilities will pay the full levy)
• risk-based levy cap: reducing the cap on the amount of risk-based levy paid by individual schemes from 0.5% to 0.25% of (unstressed) liabilities
• yearly review of levy rules: the PPF plans to take a year by year approach to setting its levy rules, until 2023/24, to give flexibility to adjust for the impact of the pandemic on schemes and employers
• insolvency risk model: the PPF will measure insolvency risk using credit ratings and the insolvency risk model operated by Dun & Bradstreet, on the basis in use since April 2020
• levy scaling factor and scheme-based multiplier: these remain the same as last year, at 0.48 and 0.000021 respectively

No material changes have been made to the standard form contingent asset documents this year. That said, some changes to reflect the UK’s exit from the European Union have been necessary (for example, to the jurisdiction clauses). The PPF has also made changes to its guidance documents – to reflect regulatory developments (Brexit and the Corporate Insolvency and Governance Act 2020).

Consultation on guidance for commercial consolidators

Under the 2021/22 levy rules, commercial consolidators have their levy calculated using a different methodology to that used for other schemes (see the Commercial Consolidator Appendix).

The PPF has published draft guidance on what it expects from commercial consolidators (to sit alongside its Commercial Consolidator Appendix). In a short consultation, the PPF has asked for views on the draft guidance by 16 February 2021.

Support with levy invoice payments

In June 2020, the PPF introduced additional payment flexibility for invoices to help employers financially impacted by the pandemic. This gave schemes up to 90 days (without interest charges) to pay their levy invoice where the delay was because of the pandemic.

The PPF has said it will keep a watching brief on the economic environment during 2021. Ahead of levy invoicing in autumn 2021, it plans to tell schemes whether additional payment flexibility will be offered again.

Deadlines

Generally, the submission deadline for taking action to minimise the 2021/22 PPF levy is midnight on 31 March 2021 (including for certification or recertification of contingent assets on Exchange). 

However, there are some other relevant deadlines, including:

• deficit reduction contribution certificates: to be submitted via Exchange by 5pm on 30 April 2021
• certification of block transfers: to be submitted via Exchange by 5pm on 30 June 2021

The supporting documentation must be emailed to the PPF by 5pm on 1 April 2021. Given the ongoing COVID-19 pandemic, the PPF has asked that it is not sent hard copies of contingent asset documents.

The full list of deadlines is on the PPF’s website.

Next steps

Schemes planning to certify or recertify contingent assets (or to take other levy reduction steps) should therefore start the planning process as soon as possible.

The end of the Brexit transition period has resulted in changes to the rules around jurisdiction clauses and the enforcement of judgments abroad. Schemes wishing to certify an existing contingent asset where the guarantor is based in a European Union or European Free Trade Association state should seek legal advice promptly on any additional steps that may be required.

The PPF plans to issue its 2021/22 levy invoices in autumn 2021. All invoices need to be paid within 28 days of receipt.