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IPE special report May 2018

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PPF succumbs to pressure for levy deferral

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  • PPF succumbs to pressure for levy deferral

UK - The Pension Protection Fund (PPF) today confirmed it may allow companies to defer risk-based levy payments if they are struggling, after a week of pressure form industry bodies.

A spokeswoman for the UK pensions lifeboat scheme today commented: "Schemes that are struggling to pay their levy bill should contact us immediately to discuss their circumstances. In cases of extreme hardship one of the measures we can consider is instalment payments".

Earlier this week, the UK Society of Pension Consultants claimed the UK government should grant pension schemes of companies which are in financial distress temporary amnesty from PPF levies, to enable corporate sponsors to maintain their defined benefit schemes.

The National Association of Pension Funds (NAPF) proposed PPF levy reforms, arguing the levy should be capped and government should act as guarantor.

"While we can see the merit in making the levy more risk-based, we think a different approach is needed for calculating long-term insolvency risk. We are more positive about the proposals regarding investment risk but we believe that substantial changes need to be made before risk is used in levy calculations," the NAPF argued at the time.

Punter Southall also added today, given the current financial downturn, it supports the announcement by the UK life-boat scheme that it will allow deferral or staggering of the risk-based levy payment.

Kevin Burgess, senior consultant at Punter Southall, commented in the current climate, the PPF levy is a significant financial burden for many companies. 

"It would be counterproductive if paying the PPF levy meant a company was more likely to fail and hence their scheme more likely to fall into the PPF," he said.

The pension protection levy is divided into the risk-based levy and the scheme-based levy, the former of which is calculated by reference to the risk of its sponsoring employer becoming insolvent, which measures how likely it is that the scheme's members will require PPF compensation, and its funding level, which measures how large its claim on the PPF might be.

The remaining levy is a flat-rate, calculated by reference to the scheme's liabilities.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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