The PPF has published the final 2012/13 levy determination and draft, followed swiftly by final, contingent asset guidance. Levy data must be submitted by 30 March 2012.
Final levy determination for 2012/13
As noted in previous issues of Pensions Update, the key features of the new levy framework are in a table which can be viewed here
As noted in October’s Pensions Update, there is an important new requirement in relation to both new and existing ‘Type A’ (i.e. parent company/ group company) guarantees. The trustees must certify that “The trustees have no reason to believe that each guarantor, as at the date of the certificate, could not meet its full commitment under the contingent asset”.
Although the PPF Board does not generally expect trustees to undertake a covenant review on the guarantor, it does expect them to have taken proportionate and reasonable steps to reassure themselves as to whether the guarantor has sufficient value as a business. They should consider the value of the guarantee and available information on the position of the guarantor. This might include:
- reviewing the guarantor’s most recent accounts (and considering any post-balance sheet events) to assess, for example, net asset position or profitability;
- considering the ability of the guarantor to borrow money;
- making enquiries of the guarantor’s financial director and obtaining an assurance as to the strength of the guarantor compared to what is being guaranteed;
- obtaining confirmation from the directors of the guarantor to supplement publicly available information;
- requiring further financial information from the guarantor if they consider it necessary; and
- in some cases, considering the liquidity of the guarantor’s assets.
If trustees do not receive answers to their questions, they cannot give the certification, as “the Certification is to be given on the basis of information obtained by the trustees, not on the basis of attempts to obtain this information”.
Another change is that trustees can now opt to certify for less than the face value of the guarantee, or only to report the most substantial guarantors, if they do not feel that they can otherwise provide the certification. This change recognises that trustees may still have a legitimate interest in securing a guarantee for an amount higher than they know the guarantor may ultimately provide (for example, if it ensures that a group company guarantor is more likely to support the employers to avoid the guarantee being called upon). It also recognises that certification of contingent assets could be difficult if the guarantee itself had to be formally amended every year to take into account the extent to which the guarantor could offer support.
For all new contingent assets, the PPF will require “evidence that the benefit to the guarantor of entering into the contingent asset agreement has been considered and established”.