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  • December 2013
12

PPF publishes 2014/15 Levy Determination

Open-access content Wednesday 11th December 2013 — updated 5.13pm, Wednesday 29th April 2020

The Pension Protection Fund has confirmed that the pension protection levy estimate for the next financial year will remain at £695m, as proposed in its September consultation

Publishing the 2014/15 Levy Determination, which sets out the Levy Rules, the PPF also confirmed that the levy scaling factor and the scheme-based levy multiplier will remain unchanged from the previous year at 0.73 and 0.000056 respectively.

The 2014/15 levy from defined benefit schemes eligible for PPF protection is the last to be set under the three-year framework implemented in 2012/13.

However, PPF chief executive Alan Rubinstein suggested that the amount of levy collected could be lower than the estimate.

'While we are not revising our levy estimate of £695m, developments in the wider economy reinforce the suggestion in my foreword to the consultation document that falling risk could see us collecting levies below this level,' he said.

The PPF also announced its decision with regard to the change in scoring methodology used by Dun & Bradstreet, which provides the PPF with a measure of insolvency risk or failure scores.

From early next year D&B is changing the way it calculates monthly failure scores. This had raised the prospect of a corresponding change to levy rules. However, following the consultation, the PPF said that it would leave the rules unchanged. This means the new D&B scores will be included in the 12-month average calculations in the same way as the previous failure scores.

The PPF also reflected on its forthcoming shift away from D&B to Experian as its new insolvency risk provider. Experian scores will be used to calculate the levy set for the 2015/16 financial year.

The PPF said it was working with Experian to develop a scoring methodology that would improve transparency for levy payers. An industry steering group will also evaluate this scoring methodology as part of a wider review of the levy. The PPF intends to consult further on this change next spring.

This week, a survey carried out by actuaries Barnett Waddingham revealed that 90% of schemes are either worried or very concerned about the PPF's shift from the D&B risk rating to the Experian one. Fears have been raised that there will not be time to correct errors and omissions in Experian's data and pension funds could face an unfairly high levy as a result.

Nick Griggs, head of corporate consulting at Barnett Waddingham said: 'There will be winners and losers from the change in rating provider but it is vital that companies act now to address any holes in their Experian data to ensure they are accurately rated and avoid an unjustified hike in their PPF levy.'

But the PPF said today: '[We] recognise that schemes will need time to understand the new model and there will be a familiarisation period during which schemes and employers can challenge the data held by Experian before it is used in the levy.'

The PPF safeguards the interests of members of defined benefit pension schemes, compensating them should their scheme become insolvent.

This article appeared in our December 2013 issue of The Actuary.
Click here to view this issue
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