Important deadlines for reducing a defined benefit scheme’s 2015/16 Pension Protection Fund (PPF) levy are fast approaching.

Action points for trustees and employers

There may still be time for trustees and employers to take action to reduce their scheme’s 2015/16 PPF levy. However, they will need to act very quickly, especially if they wish to put in place contingent assets for the first time or recertify existing contingent assets. Trustees and employers who wish to do this, but who have not yet started the process, should speak to their usual Eversheds adviser as soon as possible for advice.

Deadlines

The relevant deadlines for taking action to minimise the 2015/16 PPF levy, including putting in place contingent assets, are as follows:

  • Deadline for submission of scheme data via Exchange (including section 179 valuations) for use in levy calculations: 5pm on 31 March 2015.
  • Deadline for putting in place contingent assets and submitting certificates: 5pm on 31 March 2015 (see further below).  
  • Deadline for certifying asset backed contributions: 5pm on 31 March 2015.
  • Deadline for recertifying existing contingent assets: 5pm on 31 March 2015 (see further below).
  • Deadline for certifying “immaterial” mortgages with Experian: 5pm on 31 March 2015.
  • Deadline for certifying deficit-reduction contributions made on or before 31 March 2015: 5pm on 30 April 2015.
  • Deadline for final certification of full block transfers that have taken place up to and including 31 March 2015: 5pm on 30 June 2015.
  • Insolvency risk to be measured using the monthly Experian scores on the last working day of the month between 31 October 2014 and 31 March 2015.

PPF compliant guarantees

Although recertification of an existing PPF compliant guarantee is a relatively simple process, the PPF has introduced new requirements for the levy year 2015/16 which also apply to any Type A guarantees being put in place for the first time.  Trustees now need to specify an amount that they are reasonably satisfied that the guarantor(s) could meet (called the Realisable Recovery by the PPF).  

As part of this requirement, and before certification or recertification, trustees will now need to have made reasonable enquiry into the financial position of the guarantor(s) and will have had to consider the likely impact of the immediate insolvency of the employers to the scheme on this financial position.  The Realisable Recovery specified can be no higher than any financial cap within the guarantee itself.  The PPF has issued new guidance in respect of this requirement (in particular click here).  Our view is that it will be necessary for trustees to consider the position carefully and, at the very least, keep an audit trail of decisions made and information reviewed.  They may also need to take appropriate covenant advice.