Levy rules 2017/18

The PPF levy rules for the 2017/18 year will be substantially the same as for the current year (2016/17).

The PPF is proposing only minor changes. For example:

  • New accounting standard FRS 102: the PPF considers it gives a better view of a company's financial position and does not require material change to the insolvency scoring system. This is after external advice and its own review 300 filers using the standard for the first time. The "vast majority" of schemes, the PPF says, will not change levy band and those that do are likely to move one band (up or down). The one proposed change relates to the large and complex and not-for-profit scorecards (that compare variables from year to year) where entities will be allowed to certify adjusted figures for these variables to neutralise the impact of the new standard.
  • Mortgage disregard: there are minor adjustments to the rules.
  • Annuities held by trustees: the PPF proposes a new approach to resolve inconsistencies that can arise in the value ascribed to these annuities in a scheme's financial statements (under the SORP) and its most recent s.179 valuation. The proportion of "non-accounts insurance assets" will be taken as zero where the asset breakdown date was after, and the s.179 accounting date before, 31 December 2015.
  • Ultimate parent companies that file small companies accounts on a consolidated basis: the small number of companies that do this and are parents of employers will be scored on the independent small scorecard.
  • Restated accounts: where accounts are restated, Experian will use them to calculate monthly scores from the date of the original accounts rather than the restatement date.

The PPF's consultation on the 2017/18 levy rules closes on 31 October. It will publish the final rules in December. View the consultation documents.

Contingent assets

For several years, the PPF has expressed disappointment with the substance of some of the contingent assets trustees submit. We are now seeing cases where it is being more rigorous in its assessment of the value attributed to contingent asset guarantees in particular. This could lead to guarantees previously recognised being refused or given only partial recognition.

The test for the PPF is whether a contingent asset reduces the risk the scheme poses. The reduction in levy an asset achieves must be proportionate to the reduction in risk. Trustees with contingent assets should remind themselves of Parts 5 to 7 in of the PPF's Guidance in relation to contingent assets.

Consultation on third triennium

Around the end of the year, the PPF will issue a consultation on the levy rules over the third triennium (2018/19 to 2020/21). So far it has said the focus is likely to be on developing the approach to measuring insolvency risk, including:

  • the case for using credit ratings where available, and industry specific scorecards for regulated financial services entities
  • further assessment of FRS102 impacts
  • review of the two small accounts scorecards to improve their predictiveness
  • review the not-for-profit scorecard to improve predictiveness and to take advantage of increased insolvency and financial data now available
  • the potential for arbitrage between some scorecards
  • the option of combining the “large and complex” scorecard population with that for the “independent full” scorecard.

It also expects "limited work" on:

  • treatment of investment risk, including greater consistency between standard and bespoke investment risk stresses
  • guidance and requirements in relation to certifying deficit reductions
  • the regimes for certifying contingent asset and asset backed funding structures
  • simplifying requirements for smaller schemes.