Talking head: The Pension Protection Fund's Chris Collins gives a speedy run-through of the latest on its levy changes, and explains why the levy is expected to fall for a further two years after 2015/16.
This included the move to a new insolvency risk provider – Experian – and a new model for assessing insolvency risk, tailored to our universe of employers.
We are primarily seeking views on whether the draft rules are effective
We believe these changes significantly improve the levy, more accurately reflecting the risk posed by individual schemes and providing our levy payers with much greater levels of transparency.
We received strong support for the move to Experian and the PPF-specific model and respondents shared our view of the benefits it will bring.
Stakeholders raised a range of points about the detailed operation of the model and other aspects of levy policy. We have considered these carefully and have set out in our policy statement, published on October 6, a range of changes to our original proposals that reflect these and strengthen our approach.
In particular, we have responded to concerns around the measurement of the age of secured charges, and looked to tackle issues raised about the possibility of scorecard arbitrage.
We have also developed our approach on asset-backed structures to allow recognition where trustees obtain an insolvency-based valuation meeting the requirements we specify.
We also published on October 6 our levy estimate for the 2015/16 levy year. This is the first year of the second ‘triennium’, and is the point we reset the scaling factor, which decides how much is collected overall.
Our funding strategy update, published in July, showed we are on course to meet our funding target of self-sufficiency by 2030, but substantial risks remain. So we have decided not to make a change in policy, but instead chosen to reflect changes in risk that we have seen.
As a result, the levy estimate has been set at £635m, a reduction from 2014/15 of nearly 10 per cent. While the future is inevitably uncertain, levy estimates for the following two years appear likely to fall rather than rise, based on the expected path of yields.
A further consultation, on the detail of the levy rules for 2015/16, runs to November 13. We are primarily seeking views on whether the draft rules are effective in delivering what is now our decided policy.
However, we are also seeking comments on a proposition on identifying secured charges which are clearly immaterial, and the guidance covering asset-backed contributions.
We encourage stakeholders to respond to our consultation, and also to continue to use our web portal and engage with Experian to understand their score.
Chris Collins is chief policy adviser at the Pension Protection Fund
