Pensions client update: PPF Levy: How to make sure your scheme has a good experian-ce in 2015

Employers/trustees have until 31 October 2014 to check and understand the Experian scores impacting their schemes, before they start to count towards their PPF levy for levy year 2015/16.

For levy year 2015/16 (which runs from 1 April 2015 to 31 March 2016), the Pension Protection Fund (the “PPF”) has moved from measuring insolvency risk using Dun & Bradstreet scores to a new PPF-specific model designed by Experian.

Although many employers / trustees will have already checked their Experian scores earlier this year, the PPF is encouraging everyone to re-check those scores now to ensure the data held by Experian is accurate, as the PPF has made a number of tweaks to the way Experian measures insolvency risk, following its recent consultation. Your Experian scores can be accessed via the online portal.

The Experian scores will start to count towards the PPF levy from 31 October 2014, so it is important to check them prior to that date.

The PPF’s response to the consultation on the second PPF levy triennium – levy years 2015/16 to 2017/18 can be accessed here.

The PPF has also announced that it will be collecting £635m during levy year 2015/16 (which is approximately 10% less than the previous levy year) and that its levy estimates are likely to fall further over the next two levy years. Whilst this is good news for the majority of defined benefit occupational pension schemes, there are a significant number of schemes which will see a material increase in their PPF levy invoice. The PPF has confirmed that there will be no transitional protection for those schemes.

Therefore, it is important that you understand how the new PPF-specific model affects your scheme and ensure that the data held by Experian is accurate.

For schemes which are likely to see increased levy invoices, employers / trustees should consider how to fund the increases and look at the options for reducing their invoices (e.g. putting in place contingent assets in a form which can be certified with the PPF).

Rules for PPF levy year 2015/16

The PPF is expected to publish the rules which will apply for levy year 2015/16 before Christmas, together with its guidance on certifying contingent assets (such as company guarantees and charges over property). We will report in more detail on changes to be aware of in the new year (in time for certification and re-certification of contingent assets by 5pm on 31 March 2015).

Self-certification of mortgages which are not relevant to insolvency risk

One area of development we will be keeping an eye on is how the PPF plans to exclude mortgages which are not relevant to insolvency risk from the PPF-specific model (i.e. charges over property which have been granted in favour of a scheme or charges which are deemed to be “immaterial”). At present, it appears that employers / trustees will need to notify the PPF of such mortgages through a self-certification process, between 31 December 2014 and 31 March 2015. However, the PPF expects to publish further details on this process before Christmas and we will keep you informed of developments in this area.