
	How to reduce your levy

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How to reduce your levy

Even though many employers have made significant additional contributions to their schemes and actions have been taken to reduce risk, this is the first year in which the total levy target has been reduced.

The PPF have previously explained that this is because short-term improvements only have a limited impact on the long-term risk, and that they need to be more cautious in their reserving for future uncertain events. Due to the approach of setting a total target amount, to reduce your levy, it may not be enough to just take some action, you need to do more than the average scheme i.e. doing nothing or only a little may actually result in your levy increasing as other schemes reduce theirs. The PPF has proposed that this will change under the new framework from 2012/13, i.e. your levy will only be based on your own scheme’s underfunding and insolvency risk and will not depend on the risk posed by other schemes.

2011/12 Levy

The PPF has published its final "determination", setting out how it will calculate levies for the financial year 2011/12 (see here). Deadlines for submitting some of the information used in this calculation have already passed, but it is not too late to take some actions that could help mitigate the levy:

certify/re-certify contingent assets by 5pm on 31 March 2011 (more info );
certify deficit reduction contributions by 5pm on 7 April 2011;
certify full block transfers that have taken place up to and including 31 March 2011 by 5pm on 30 June 2011

2012/13 Levy

There are also a number of other actions that can be taken to mitigate the size of the levy for the 2012/13 levy year. The PPF will be using data submitted via Exchange on or before 31 March 2011 to set the scaling factor for 2012/13. However, starting from 28 April 2011, the D&B failure score will be calculated as the 12 month average of the score at the last working day of each month. As this date has passed, you need to consider whether there is any immediate action you could take to improve the D&B failure score to try and improve your average, as well as strategies for maintaining the score throughout the year. Please click here for a checklist of matters to consider. Alternatively please click here for further details of the services Barnett Waddingham can provide in this area.