PPF announces levy calculation changes

The Pension Protection Fund (PPF) has published proposals for the 2011/12 pension protection levy year which improve the way it assesses the insolvency risk for sponsoring employers of pension schemes that pay the levy.

These proposals reflect industry feedback and a review of methodology and insolvency probabilities carried out by Dun and Bradstreet (D&B) which continues to measure insolvency risk for the PPF.

PPF chief executive, Alan Rubenstein, said: “Measuring the insolvency risk of the 20,000 sponsoring employers of schemes we protect is a complex task – and we need to have a system which accurately reflects the risks posed by a range of different employers, commercial and non-commercial, large and small, UK and foreign. We have shown in the past we are prepared to make changes to the way we do this.

“We work continually with D&B to make sure that failure scores, and the risk of insolvency we associate with these, remain appropriate. D&B has reviewed its methodology and insolvency probabilities in light of the significant economic changes that have taken place in the last year or so. Therefore, we thought it timely to assess D&B’s review and address the issues raised by industry about insolvency risk measurement.”

Key changes include:

  • D&B will collect accounts from the Charity Commission rather than relying on charities providing their own accounts
  • A new attribute called ‘nationwide’ will be introduced for businesses with three or more branches in different UK regions which will mean they are assessed as a national rather than regional employer
  • PPF-compliant contingent assets will be excluded by D&B in their scores as they reflect the financial position of the pension scheme and not the employer
  • When measuring the failure score of a subsidiary whose parent company is at substantial risk of going bust, the score of the subsidiary will be that of the parent, and
  • Employers that seek changes to their industry sector or geographical region will need to provide evidence to support that change.

Click here for articles on occupational pensions