The Pension Protection Fund (“PPF”) has confirmed that the 2013/2014 levy estimate will be £630 million. The levy scaling factor will be reduced, meaning that fewer schemes will have their levy capped.
In addition, the PPF has relaxed the minimum credit rating requirements for financial institutions holding or issuing the following types of contingent asset to A3/A- (from Aa3/A--):
- Type B(i) contingent assets (where the scheme has a charge over cash in a bank account);
- Type B(iii) contingent assets (where the scheme has a charge over shares held by a custodian); and
- Type C contingent assets (where a letter of credit or bank guarantee is issued to the scheme).
Although no changes have been made to the requirements for Type A contingent assets, the PPF has updated its guidance on such assets. Type A contingent assets are a parent or group company guarantee granted to the scheme. Among other things, the updated guidance states that, when considering the strength of the guarantor, trustees should bear in mind the fact that the guarantee is only likely to be called upon in the event of an insolvency of the sponsoring employer and should factor this into their assessment.
Schemes with Type B(i), B(iii) and C contingent assets held at or issued by financial institutions whose credit ratings are below the level previously required by the PPF should consider whether those contingent assets are now capable of certification.
Schemes with Type A contingent assets should ensure that they read and consider the PPF’s updated guidance before certifying/re-certifying such assets.