PPF levy 2022/23: deadlines are approaching

• United Kingdom

• Pensions

09-03-2022

Important deadlines for reducing a defined benefit scheme’s 2022/23 Pension Protection Fund (PPF) levy are fast approaching. Schemes should take careful note of the PPF’s levy submission deadlines published in its final levy rules for 2022/23.

Deadlines

Generally, the submission deadline for taking action to minimise the 2022/23 PPF levy is midnight on 31 March 2022, including for certification or recertification of contingent assets on the Pensions Regulator’s Exchange system and submission of asset backed contribution certificates to the PPF.

Supporting documents for contingent assets (including a guarantor strength report, if required) must be emailed to the PPF by 5pm on 1 April 2022.

Other deadlines include:

• deficit-reduction contributions certificates: to be submitted via Exchange by 5pm on 29 April 2022

• certification of full block transfers: to be submitted via Exchange by 5pm on 30 June 2022

The full list of deadlines is on the PPF’s website

Levy rules for 2022/23

The majority of schemes are expected to see a reduction in their levy but for the minority seeing an increase, the increase will be limited to 25% of the scheme’s 2021/2022 levy.

The PPF confirmed that measures introduced in 2021/22 to support schemes through the pandemic will remain in place, including the lower risk-based levy cap, the small scheme adjustment and the pandemic payment easement.

Some other key points to note are:

• 2022/23 levy estimate: the expected total levy is £390m. This is a reduction of £130m from 2021/22, and means over 80% of schemes that pay the risk-based levy will see a reduction in their levy

• risk-based levy cap: the risk-based levy cap remains at 0.25% of scheme liabilities

• insolvency risk model: the PPF continues to measure insolvency risk on the basis in use since April 2021. The PPF says that the PPF-specific insolvency model operated by Dun & Bradstreet continues to be predictive and is fit for purpose

• section 179 valuation basis: following the updated s179 assumptions guidance which came into force earlier in 2021, the PPF is changing the s179 valuation output basis. These changes bring PPF assumptions in line with the bulk annuity market and are expected, typically, to reduce schemes’ s179 liability values used to calculate the levy

• consolidators and schemes without a substantive sponsor (SWOSS): the PPF has brought together the previously separate rules covering commercial consolidators and SWOSSs into a single “alternative covenant scheme” appendix, widening the definition so that all schemes without a conventional sponsorship structure can be treated consistently

The PPF made very limited changes to other areas of its methodology for calculating scheme levies.

Next steps

There is still time for trustees and employers to take action to reduce their scheme’s 2022/23 PPF levy. However, they will need to act quickly, especially if they wish to put in place contingent assets for the first time or recertify (and therefore get credit in the PPF levy for) existing contingent assets.

The PPF plans to issue its 2022/23 levy invoices in autumn 2022. All invoices will need to be paid within 28 days of receipt, subject to the PPF approving a specific extension for those negatively affected by the pandemic.

For more information, please speak to your usual Eversheds Sutherland adviser or: