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How will the revised Pension Protection Fund (PPF) levy estimate affect employers' insolvency ranking? Naomi Brown, senior associate at Sackers, explores the immediate impact of the new levy estimate.
Original news: PPF announces 2015/16 levy estimate,
Following a consultation between May and July 2014, the PPF announced the levy estimate for 2015/16 will be set at £635m, nearly 10% lower than the 2014/15 estimate. The PPF also announced the launch of a consultation on detailed rules for the 2015/16 levy, which will close on 13 November 2014.
Why is the PPF introducing a new model for assessing insolvency risk?
The primary reason for moving to a new model is to improve the levy by:
What are the main aspects of the new model?
The main aspects of the new model are:
How will schemes be affected by the new model?
Many employers will see their insolvency ranking change--as a result their 2015/16 levy may differ significantly from what they have paid in previous years. Although the PPF did consider providing some transitional protection for those most affected, it has decided not to do so following consultation.
What actions should employers and schemes be taking?
The PPF will use insolvency scores from 31 October 2014 in the 2015/16 levy calculations. Therefore, before that date, employers and schemes should:
They should also be aware that it is not just the insolvency risk model which is changing. They could also be affected by significant changes to other aspects of the levy process. In particular, schemes which have identified themselves as 'last man standing' schemes and/or which have either parent company guarantees or asset-backed contribution structures in place should seek advice to understand what the changes will mean for them.
If you are a LexisPSL subscriber, click the links below for further information on pensions and insolvency:
The Pensions Regulator and its power to issue a contribution notice and financial support direction (Subscriber access only)
Not a subscriber? Find out more about how LexisPSL can help you and click here for a free trial of LexisPSL Restructuring and Insolvency.
First published on LexisPSL Restructuring and Insolvency
Interviewed by Diana Bentley.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor
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