PPF: What our levy work means for your scheme

The intention was to bring greater stability and predictability to bills. This included smoothing scheme funding, reflecting investment risk and introducing bands for insolvency scores.

We also committed to keeping the levy rules stable for three years until 2014/2015. We had to intervene once – to keep levy bills down overall – but otherwise if a scheme’s bill has changed, it has reflected a change in that scheme’s own risk.

We are now looking at our approach to the levy for the next three years. Most importantly we’ve confirmed the plan to use a new Pension Protection Fund-specific insolvency model tailored to sponsoring employers and the risks they pose.

Since July 2013 we’ve been working with provider Experian and industry advisers on this model. So far we believe it will more accurately reflect the insolvency risk of employers whose schemes pay the levy.

Greater transparency will also make it easier to see how scores have been calculated. A stronger emphasis on objective financial data than other models also means greater stability in scores over time.

We plan to publish our consultation at the end of May. This will set out the detail of how the proposed new model will work and how scores are included in levy bills. We then plan to publish the draft levy rules for 2015/2016 in September.

The 2011 formula was developed in close cooperation with stakeholders. We have therefore been grateful for the input we have received this time, particularly from our industry steering group.

Of course, schemes and their advisers will want to know what this means for them, and we plan to make scores available alongside the consultation in May. 

For the 2015/16 levy year, we plan only to use six months of scores from October 2014 onwards. This means there will be time for schemes to familiarise themselves with the new scores and where appropriate correct, amend or challenge data.

We are committed to only changing the levy rules where there is a significant and demonstrable improvement. We are confident the PPF-specific model meets that test. 

I would encourage schemes, employers and advisers to be ready to look at their scores and respond to the consultations.

David Taylor is head of strategy and legal affairs at the PPF