On the go: The Pension Protection Fund has announced its final levy rules for 2022-23, which include a new 25 per cent cap on increases to its risk-based levy to protect schemes whose bills would otherwise rise significantly.
The lifeboat fund has introduced a new limit for 2022-23 only, which will ensure individual risk-based levies will not increase by more than 25 per cent when compared with 2021-22. This is to support the minority of schemes that do not see a reduction in their levy bill.
The new limit responds to the PPF’s monitoring and to stakeholder and industry feedback, noting the extent to which the forced closure of businesses during the pandemic resulted in downgrades in their insolvency risk scores.
Chris Bunford, principal at LCP, said: “The pandemic has caused some unfortunate, and in some cases artificially short-term, impacts to sponsors’ insolvency scores that were resulting in very large increases to certain schemes’ levies.”
He continued: “The PPF has taken advantage of its strong funding position to implement a simple and pragmatic approach, that ensures schemes are not suffering unduly because their sponsors followed government rules to close for a period.
“It seems a sensible and considered approach that is great news for schemes with sponsors hit by Covid-19 and will be welcomed by many.”
The lifeboat fund’s policy statement also confirmed that the measures introduced to help schemes and employers with the cost of the levy in 2021-22, including the small scheme adjustment, lower cap on the risk-based levy, and Covid-19 payment easement will remain in place.
Under these rules, the PPF estimates that more than 80 per cent of schemes that pay a risk-based levy will see their levy fall.
As a result of the introduction of the 25 per cent limit on increases in the risk-based levy, and market movements and changes in insolvency risk scores up to the end of October, the PPF has revised the levy estimate for 2022-23. It now expects to collect £390m from its levy payers, which is £130m less than the previous year.
David Taylor, executive director and general counsel at the PPF, said: “We’re grateful for the positive engagement we’ve received from our levy stakeholders, and are confirming our proposed levy rules which will see the majority of levy bills drop in 2022-23.”
He added: “We do, however, recognise the exceptional nature of the pandemic, and the potential impact of levy increases for a limited number of schemes. Our new and existing support measures are intended to help schemes and employers through this period.”
The final rules follow a six-week consultation, which invited PPF levy payers and industry stakeholders to comment on the proposed 2022-23 levy rules.
Elsewhere, following a search that was launched earlier this year, the pensions lifeboat has appointed two companies for custody and investment operations outsourcing services.
Northern Trust has been appointed as the primary custodian. The company will provide both custody services, which include accounting and transfer agency services, and investment operations outsourcing services.
JPMorgan Chase Bank has also been hired as reserve/secondary custodian.
