PPF delays changes to the levy
On 31 July 2009, the PPF published its response to its consultation on the long-term future of the pension protection levy (issued on 18 November 2008). It confirms that it will introduce a new element to the risk-based levy to reflect "unexpected risk" (dealing with the probability of a sponsoring employer becoming insolvent during a five-year period (in addition to its current practice of assessing the likelihood of employer insolvency in a one year period)).
However, the PPF has reserved its position on whether to factor in an assessment of "investment risk" (dealing with the scheme's investment strategy and the risk that may pose to the PPF). It has confirmed that it will set up a steering group to consider such issues as the balance between short-term and long-term risk, options for measuring long-term insolvency risk and options for measuring investment risk. The PPF will consult on its full proposals in early 2010 and intends to finalise its levy policy later in that year.
Consequently, the PPF has confirmed that it will delay any changes to introduce either or both of these two risk-based elements by a minimum of one year, meaning that the "unexpected" and/or investment risks will come into play in the levy year 2012/2013 at the earliest. This was one year later than had been proposed originally.
PPF consults on section 179 and section 143 valuation assumptions
In July, the PPF issued a consultation paper on the "assumptions to be used for valuations under section 143 and section 179 of the Pensions Act 2004". The consultation period closed on 11 September 2009.
The consultation covers both PPF levy valuations (section 179) and PPF entry valuations (section 143). The proposed changes are aimed at better matching current market buy-out terms. Based on model calculations, the changes are, according to the PPF, expected to decrease section 143 and section 179 liabilities by around 8% for pensioners and around 10% for deferred pensioners. It is proposed that changes will be introduced with effect from 31 October 2009 so that both section 179 and 143 valuations will be based on the present assumptions where the valuation date was before 31 October 2009; but will be based on any new assumptions for later valuation dates. There will, therefore, be minimal impact on PPF levies for the year April 2010/2011.
However, the suggested reductions of 8%/10% will not necessarily mean that levies will reduce by that amount overall.