The PPF has now published a consultation paper detailing its new proposals to reflect long-term risks when apportioning the levy with effect from 2011/12. Although the approach is intended to be fairer, it may result in well-funded schemes with financially strong employers losing out to those schemes which are less financially robust.
Under the new proposals, the risk-based element of the levy will continue to take into account short-term risk but will also assess the probability of a scheme’s employer becoming insolvent within the next five years. The risk the scheme’s investment strategy poses to the PPF will also be taken into account in assessing the risk-based levy. The levy will be higher for those schemes which pursue riskier investments.
The consultation closes on 13 February 2009.
Comment: the focus on fairness has been generally welcomed, although the proposals will add a further layer of complexity to the PPF levy calculation. The message that schemes may be penalised for pursuing what the PPF regards as riskier investment strategies may also affect trustees’ investment choices.
View the consultation paper (pdf)(356KB)