The Pension Protection Fund (PPF) has finalised its levy rules for 2023-24. Some of the highlights are:
- The risk-based levy cap will remain at 0.25% of scheme liabilities
- The risk-based levy-scaling factor will be reduced by 23% to 0.37%
- The scheme-based levy multiplier will be reduced by 10% to 0.000019
- The increments between levy bandings have been halved, meaning that there is less of a cliff edge for those schemes that move between levy bands
- The levy estimate has been nearly halved and is £200 million, down from last year’s levy estimate of £390 million
- As a result, the PPF expects that 98% of schemes will pay a lower levy this year and that the majority of schemes that pay a risk-based levy will see their risk-based levy reduce by more than 50%
The timetable is similar to last year. Scheme returns and any electronic contingent asset certificates must be submitted to The Pensions Regulator (TPR) via Exchange before midnight on 31 March 2023. Documents supporting contingent asset submissions or recertifications must be submitted to the PPF by email before 5 p.m. on 3 April 2023. The full timetable is set out in the PPF’s levy timeline.
The PPF’s standard-form contingent asset documents incorporate references to events that are notifiable to TPR in accordance with the notifiable events regulations. The Department for Work and Pensions is in the process of amending those regulations. We do not know when the amending regulations will be published but, when they are, the PPF will update its standard form contingent asset documents to reflect the changes. This means that it may be necessary, in due course, for trustees to re-execute their contingent assets. We will know more once the PPF has decided the extent to which the existing standard-form documents require amendment. In the meantime, if you would like assistance with this year’s contingent asset submission, please get in touch with your usual firm contact.
Finally, we recommend that trustees and levy payers take time to think about whether the status of their scheme might mean that it is classified as an “alternative covenant scheme”, for PPF levy calculation purposes. This might be the case where the trustees no longer rely on the covenant of a trading business and are instead supported by assets, for example, where there has been a restructuring to swap in an employer that has never employed any of the pension scheme members, or the sponsoring employer ceases to trade. In those types of scenarios, the PPF will take a decision on whether the normal method of calculating the PPF levy should apply or whether the levy should be calculated by reference to the alternative covenant scheme appendix.
If you have any queries in relation to any of the above, please speak with your usual firm contact.