On 5 September 2013, the PPF published its 2014–15 Pension Protection Levy consultation document, which confirms that the rules for the 2014–15 levy will remain largely unchanged for the third and final year of the New Levy Framework.

The PPF estimates that they will collect £695m for 2014–15, constituting an increase of about 10 per cent on the £630m due to be collected in the 2013–14 levy year. This increase is partly due to the altered methodology employed from the 2012–13 levy year onwards for calculating a scheme’s underfunding. In particular, this applies to the method of smoothing scheme assets and liabilities across a five-year period.

The PPF has not adjusted the rules to reflect any of the following:

  • the PPF’s plans to increase the compensation cap by 3 per cent for each full year of service in excess of 20 years, which Steve Webb announced on 25 June 2013;
  • the Pensions Regulator’s new statutory objective to consider the interests of a scheme’s sponsoring employer in funding matters; and
  • future changes to legislation to reflect the Supreme Court decision inHouldsworth v Bridge Trustees Ltd (2011) that benefits cannot be regarded as ‘money purchase benefits’ if a funding deficit could arise in relation to them.

However, the PPF is looking for views as to whether:

  • the 2014–15 levy determination should incorporate a rule allowing for the levy to be recalculated if money purchase benefits in a levy-paying scheme are recategorised as defined benefits;
  • it should change the current contingent asset process used by schemes to reduce their risk-based levy, such that contingent assets can be recertified if they had been certified in the previous five years, rather than only in the immediately preceding year. This means that, provided the underlying asset agreement remained in place during the years the asset was not certified, schemes can recertify contingent assets without a full application; and
  • the certification that trustees must give for type A contingent assets should be altered from a negative confirmation to a positive confirmation. The current requirement for trustees to confirm that they have ‘no reason to believe that each certified guarantor… could not meet its full commitment under the contingent asset’ prompted concerns that if trustees knew of a single, potentially insignificant reason why each certified guarantor could not meet its commitments, they would not be able to confirm the statement. However, rewording the confirmation as a positive statement – ‘having made reasonable enquiry into the financial position of each certified guarantor, [the trustees] are reasonably satisfied that each certified guarantor… could meet its full commitment under the contingent asset’ – would mean that trustees only needed to be comfortable, rather than certain, of the guarantor’s ability to meet its obligations.

The consultation document confirms the following datesor deadlines (listed chronologically here):

  • insolvency risk will be measured using the average annual failure score of each sponsoring employer measured on the last working day of each month – from 30 April 2013 to 31 March 2014;
  • scheme data must be updated via Exchange – by 5pm on 31 March 2014
  • the reference period over which funding is smoothed – the five year period to31 March 2014;
  • trustees must submit contingent asset certificates to the PPF for certification/re-certification to be reflected in 2014–15 levy (including documents required to be provided in hard copy) – 5pm on 31 March 2014;
  • trustees must provide the PPF with certification of deficit-reduction contributions – 5pm on 30 April 2014;
  • trustees must provide the PPF with certification relating to full block transfers – 5pm on 30 June 2014; and
  • beginning of invoicing – Autumn 2014.

This consultation is open until 24 October 2013. In early 2014, the PPF will consult on the rules for the three years to 2017–18 and in autumn 2014, the PPF will consult on the final levy rules for 2015–16.

Please click here to view all the documents uploaded on the PPF website relating to the 2013–14 levy, including a draft determination and draft guidance.