Published by Nick Griggs on
Pension scheme trustees and sponsors could therefore be forgiven for thinking that PPF levies could be removed from the agenda for another year. However, for many schemes, this is not the case.
Many schemes are in deficit, and employers pay often significant contributions in line with a Recovery Plan. DRC certificates are a popular option for reducing the size of PPF levies.
DRC certificates need to be certified by the Scheme Actuary and are intended to show a prudent estimate of the contributions that have been paid into a scheme to reduce the scheme deficit, after allowing for expenses and benefit accrual (if any).
A DRC certificate accepted by the PPF directly reduces the deficit in the levy calculation, leading to a reduced PPF levy.
DRC certificates need to be submitted on The Pensions Regulator’s Exchange system. The deadline for this is 5pm on 30 April 2015.
Following last year’s PPF levy consultation, one of the many changes that the PPF introduced was a stricter inspection of those schemes that are classified as LMS in the Scheme Return. LMS schemes (i.e. multi-employer schemes where the other sponsoring employers would bear responsibility for the pension scheme liabilities if one of the other sponsoring employers became insolvent) have benefited from a reduction in their PPF levy. However, the PPF was concerned that many of these schemes were incorrectly classified.
As a result, the PPF will now be requiring trustees of schemes that are categorised as LMS in the Scheme Return to confirm that they have received legal advice in relation to their scheme structure.
Trustees of LMS schemes will receive an email from the Pensions Regulator containing a link to an online form, in which the trustees must confirm whether or not they have received legal advice confirming their scheme structure.
This form needs to be submitted by 29 May 2015 in order for a scheme to receive a discount on its 2015/16 levy.
A final consideration in respect of the 2015/16 PPF levy is for schemes where a 'full block transfer' has taken place before 1 April 2015, i.e. where a group of two or members has transferred to another PPF-eligible scheme, leaving fewer than two members in the scheme.
The main reason for the PPF requiring these cases to be certified is to ensure that schemes that have transferred their liabilities are not charged a PPF levy, and that the liabilities of any receiving scheme correctly reflect their funding position at the levy year end for the calculation of the 2015/16 PPF levy.
The PPF requires 'full block transfers' to be certified on The Pensions Regulator’s online Exchange system by 5pm on 30 June 2015.
It may seem premature, but the PPF will begin recording the Experian insolvency risk scores at the end of April for the purposes of next year’s PPF levy, i.e. the 2016/17 PPF levy. Employers and trustees should therefore ensure that they are aware of how the scheme sponsoring employers are being rated, monitor their Experian scores, and consider whether it is possible to take any action to improve these.
Schemes can expect to receive invoices in respect of the 2015/16 PPF levy in autumn this year.
|Submit Deficit-Reduction Contributions Certificate||By 5pm, 30 April 2015|
|Confirm legal advice held on LMS status||By 29 May 2015|
|Certification of full block transfers||By 5pm, 30 June 2015|