The PPF has today uploaded the final 2016/17 Levy Determination to its website. Changes proposed in the PPF’s September consultation document focused on a reduction in the admin. burden on schemes and improving the practical elements of rules which had been introduced in 2015/16.
Schemes which have classed themselves wrongly as Last Man Standing in the past and thereby gained a levy advantage should expect to see an extra bill after historic levies have been recalculated;
Relatively minor changes may have a significant impact on employers’ Experian scores although the PPF levy calculation methodology itself remains largely unchanged.
A small change to the method of converting foreign accounts to Sterling is to be introduced for the 2017/18 levy year. This may have an impact in your levy if you have employers or guarantors based overseas.
Mortgage disregard certificates
The PPF have confirmed that only immaterial mortgages will need to be re-certified and the rest can be carried forward. Credit rating certificates will be reviewed as at 31 March 2016 to see if the rating remains Investment Grade. If not, the benefit of the certificate will be withdrawn for all Monthly Scores counting for 2016/17 levy. To mitigate any impact the PPF have reviewed them early. Schemes will be able to see the potential impact it has on scores and take appropriate action before then.
Charges over bank accounts are to be included in the definition of immaterial mortgages.
Currently a Refinance mortgage has to be entered into within 14 days after the discharge of the original mortgage. Where information was unavailable to Experian at the relevant time it may still be taken into account where this unavailability was not due to action or inaction on the part of the trustees or employer.
Where a Refinance mortgage replaces more than one mortgage, the date of the most recent mortgage will be used.
Employers whose governing documents prohibit borrowing will be allowed to self- certify they have no mortgages.
The definition in the C(i) agreement has been expanded to allow an insurer to give a guarantee not just a bank.
The absence of data for a brand new entity means that Experian cannot score it. The PPF are extending the rules to allow audited interim accounts to be voluntarily submitted by employers.
Last Man Standing Schemes
These are multi-employer schemes. Normally an insolvent employer would trigger entry to the PPF but in LMS schemes this is not automatically the case and the pensions burden passes to other group employers. The PPF takes the view that its risk of taking the insolvent employer’s scheme members into the PPF is reduced and offers a small levy reduction.
Schemes had to report this year that they had taken legal advice on whether they were LMS or not. The PPF has now decided that any benefit gained in the past from wrongly reporting as LMS must be recovered. Accordingly they will be contacting schemes which have changed their LMS status for an explanation which, if not satisfactory, could lead to re-invoicing. However we believe it is unlikely they will try to recover sums outside the limitation period of six years.
Filing abbreviated accounts
Companies that provide Experian with full accounts, though they file abbreviated accounts with Companies House, will be able to provide preceding years’ full accounts for trend variable calculations.
Mitigating your levy bill
Historically low gilt yields mean that levies are likely to rise in any event. Consider measures now to mitigate any rise.
- Nearly 1,000 employers gained from submitting mortgage disregard certificates this year and substantial reductions were made. If you have not already submitted a certificate, consider it in good time for next March.
- Consider putting in place a Type A guarantee where the guarantor has a better insolvency rating than the employer. Do remember the PPF’s new “realisable recovery” rules on trustees’ assessments of guarantor covenant. The trustees must be ready to demonstrate they have complied fully with the requirements – the PPF can refuse to recognise contingent assets.