Getting deficit reduction payments certified will be easier under the 2018-19 levy rules, says the Pension Protection Fund's Chris Collins.

Invoicing will begin this autumn, and the next deadline for levy payers is for the submission of deficit-reduction contribution certificates on April 30 2018.

We are keen to make the process of certifying deficit-reduction contributions as simple as possible

Many sponsoring employers are taking significant steps to reduce deficits in their defined benefit schemes, and in recognition of this, we are keen to make the process of certifying DRCs as simple as possible.

For the first time, many smaller schemes will have the option for trustees or employer representatives to certify DRCs based on recovery plan payments, without requiring further actuarial input.

If the scheme sponsor has made payments to reduce the deficit since the last valuation, then these can be certified so that the impact on funding is reflected in our levy calculations.

To decide if DRC self-certification is appropriate, there are certain criteria to be met:  

  • total protected liabilities as recorded on the relevant section 179 valuation must be less than £10m;

  • the scheme must have been closed to benefit accrual throughout the certification period; and

  • the scheme must have had a recovery plan in force at some point during the certification period.

There may be some cases where a scheme fits the criteria above but actuarial input is still required, for example when the scheme wishes to certify special contributions not included in the recovery plan, or when the amount to be certified is more than £1m.

A flowchart provides guidance to help with the decision-making process.

All schemes can use the existing process for the certification of payments.

This process has also been simplified by removing the requirement to include investment-related expenses when considering the scheme expenses that must be deducted from contributions made. This will typically mean a higher sum can be certified than in previous years.

The final deadline

The final deadline for levy payers ahead of invoicing is June 29 2018, and is for the certification of full block transfers to be completed. This relates to a small number of schemes where liabilities for more than one member have been transferred between schemes.

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This certification allows us to ensure schemes that have transferred all their liabilities are not charged a levy, and that liabilities are correctly recorded at the receiving scheme so that their levy takes account of them.

What if information about your scheme or employer is wrong?

Where a levy payer believes information they have supplied or that Experian hold on their employers is wrong, it is important to let either party know.

We generally invoice based on information supplied by the appropriate deadline, but do have limited discretion to correct errors – the earlier we are contacted, the better.

Chris Collins is chief policy advisor at the Pension Protection Fund

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