The Pension Protection Fund (“PPF”) has issued its determination on the calculation of the levy for the 2020-21 year. This is the final year of the current triennium, so no major changes are proposed.
The PPF expects to collect £620 million in levies in 2020-21. This is based on keeping the levy parameters (the Levy Scaling Factor and the scheme-based levy multiplier) unchanged.
The PPF notes that many employers will have recognized a provision for the cost of GMP equalisation as a past service cost in their latest accounts. In some cases this may have caused the employer to recognize a loss where there would have been a profit without the provision for equalisation. This may lead to the employer falling into a different insolvency risk band and so having to pay a higher risk-based levy. In recognition that the provision represents a cost that will be met over a long period of time, the PPF will allow employers to request an adjustment to their insolvency risk score, providing that all the following conditions apply:
- a specific amount can be identified in accounts used to calculate one or more monthly insolvency risk scores that relates solely to a GMP equalisation adjustment;
- allowing the adjustment would result in the company being viewed as reporting a pre-tax profit rather than a loss and
- allowing the adjustment would result in a change of average insolvency risk score to a Levy Band with a lower Levy Rate.
The PPF will produce a form to help affected employers to provide appropriate evidence. Requests should be made within 28 days of average insolvency risk scores being published (expected to be in early July 2020).
For the current triennium (2018-21) the PPF uses the S&P credit model to derive insolvency risk scores for regulated banks, building societies and insurers. The model has been recalibrated and the PPF will be reflecting the recalibrated scores from April 2019.