TTG Pension Trustees Ltd v The Board of the Pension Protection Fund  EWHC 174 (Ch)
Pension schemes that potentially qualify for assistance under the Pension Protection Fund ('the PPF') are required to pay a levy which includes a risk-based levy, which is based on the insolvency risk of the sponsoring employer and the funding position of the scheme (measured on a specific basis). There are certain circumstances in which the risk based levy can be reduced – e.g. if the scheme has the benefit of a contingent asset guarantee which satisfies prescribed requirements.
The PPF issues an annual determination policy which specifies how the risk based levy is to be calculated for that levy year, and indeed it did so for the levy year 2011/12 which was the subject matter of a recent High Court case.
In that case,
- Scheme information, as at 31 March 2010, on the Pensions Regulator's scheme information system (‘Exchange’) indicated that the TT Group (1983) Pension Scheme (‘the Scheme’) had 13 Scheme employers (including TT Electronics plc ('the Principal Employer');
- All the Scheme employers entered into a scheme apportionment arrangement (‘SAA’) in October 2010 so that all their Scheme liabilities were apportioned to the Principal Employer. These employers then formally ceased to participate in the Scheme and paid whatever amounts were due from them under the SAA ;
- On 28 March 2011 the Principal Employer entered into a contingent asset guarantee ('CAG') agreeing to stand behind all the liabilities of the employers in the Scheme, which was then submitted to the PPF with the aim of reducing the PPF levy payable by the Scheme for the 11/12 levy year. This was on the premise that the CAG, based on the employer information on Exchange (and used by the PPF) as at 31 March 2010 reduced the insolvency risk and should be taken into account for risk based levy reduction purposes.
The PPF rejected the CAG for this purpose and said that although, when calculating the levy the information it used to measure risk was as at 31 March 2010, the date it used to assess risk reduction measures such as the CAG was, under the 11/12 levy rules, 31 March 2011. So here, because as at 31 March 2011, the Principal Employer, which was the guarantor under the CAG, was the only employer in the Scheme, the CAG did not meet the criteria under the 11/12 levy rules (and in particular did not reduce the risk of compensation being payable by the PPF) and so the risk based levy would not be reduced.
The case was heard in the High Court following the failure of the Trustees’ various appeals in relation to the above to the PPF’s reconsideration committee and the PPF Ombudsman (‘the PPFO’). Their grounds of appeal to the High Court included that the PPFO's decision was inconsistent and contradictory and did not explain why, having found that the PPF had not correctly interpreted the levy rules, the PPFO still considered that the PPF's reconsideration committee had been correct in its decision.
The High Court dismissed the Trustees' appeal, saying that although the PPFO's reasoning was ‘inadequately, and in some respects incorrectly reasoned' it was correct.
The PPF's levy calculation rules have changed since the circumstances of this case, so its outcome in practical terms has limited application, though it does reinforce the need to be aware of the levy rules that are determined by the PPF for any particular levy year and that the dates applicable for various purposes of the levy assessment are not necessarily the same.