PPF confirms new levy rule for sponsorless schemes
The Pension Protection Fund (PPF) has confirmed its new levy rule for schemes without a substantive employer for the 2017/18 year.
The lifeboat fund also confirmed its levy rules for the coming year would remain largely unchanged compared to the previous two years of the triennium, as preliminarily announced in December.
In a policy statement, the PPF confirmed the levy rule for sponsorless schemes will only apply to such schemes that were set up over the next year, not those that already exist. However, it will consider how to apply the levy rule to existing sponsorless schemes in its 2018/19 rules.
It believes its current methodology for calculating levies, which assesses the sponsor's insolvency risk, would not be appropriate and will instead base the levy on the commonly-used pricing model for put options.
The new British Home Stores scheme to be set up following a restructuring is expected to be the first to come under the changed levy rule.
The lifeboat fund also set a number of conditions to be met for the levy to apply. These include the scheme having been separated from its previous substantive employer, or the sponsor has become insolvent.
Furthermore, a scheme that is continuing, or has launched a new scheme to do so, must be seeking to pay benefits solely from its assets. These schemes must also satisfy the PPF that continuing to operate without a sponsor is feasible without causing too much risk for members and levy-payers.
Finally, the scheme would need to have an ongoing governance arrangement. The watchdog said this element was "integral" and a "hook to formally engage these rules". In future, this could become a trigger for becoming subject to the new levy.
Although the new rules do not apply to existing schemes without a substantive sponsor, the PPF said it would consider how it can apply the levy, or a modified version of it, for those schemes in the 2018/19 rules.
As such, the lifeboat fund is keeping its consultation on the levy open for the foreseeable future.
The PPF also launched its consultation on levy rules for the next triennium, from the 2018/19 year, on 23 March. Under the proposed rules, almost two-thirds of schemes could see their levy reduced from next year.
A recent PP article explores concerns that the new levy rule could stop future regulated apportionment arrangements, which could soon be decided for the British Steel Pension Scheme.
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