Pension Protection Fund Levy Certification 2019/20 – deadline approaches

The deadline is approaching for trustees and sponsors to prepare for the Pension Protection Fund (PPF) levies and the associated certification of contingent assets in order to help manage these. Some trustees will be looking to certify group company guarantees (“Type A” contingent assets), whilst others may be seeking to value asset backed contribution (“ABC”) structures. Many will have received levy benefit from these assets in previous years and will need to re-certify for 2019/2020 to do so again.

As the official deadline of 31 March 2019 is on a Sunday, we recommend completing all requirements by Friday 29th March to avoid any risk of missing the deadline.

In December 2018, the PPF released the ‘2019/20 Pension Protection Levy Policy Statement’ that largely maintained the levy rules applicable in 2018/19 with some minor changes which are detailed below. As a reminder, a number of fundamental changes to certification requirements for Type A Contingent Assets (guarantees) were made in the 2018/2019 levy year (most notably the introduction of the guarantor strength report (“GSR”)).

The key incremental changes made in 2019/20 are:

  • Existing Type A (parental guarantee) and Type B (security over asset) contingent assets entered into before 18 January 2018 that include a fixed sum maximum amount must be re-executed on the new PPF standard forms published in January 2018 (if this has not been done already) to obtain levy credit
  • If they didn’t previously, Schemes who re-execute Type A and B contingent assets to the new standard form will now need to meet the ‘new’ contingent asset certification requirements introduced last year
  • For Schemes where new certification requirements were met last year, the PPF will accept ‘refresher’ legal opinions and GSRs in certain circumstances setting out what has changed from prior year, but the legal opinion and GSR should be complete and up-to-date by reference to the 2019/20 requirements.

We continue to guide many of our clients through robust and successful PPF contingent asset certification and ABC valuation exercises. We also assist trustees in situations where the PPF has requested further information or rejected the certification of guarantees.

We can help you complete applicable requirements:

  • Where the levy saving from a guarantee is over £100k, the PPF is clear that a formal GSR needs to be obtained by trustees. A GSR which is considered by the PPF to be consistent with the guidance will ensure a levy saving
  • Where the levy saving is less than £100k, a GSR is optional but obtaining one will likely ensure a levy credit. In our experience with the PPF, to ensure a levy credit is granted, a GSR with associated duty of care to the PPF should be provided
  • Establishing whether trustees seeking levy credit for Type A and B contingent assets will be required to re-execute their instruments
  • Advising on best practice for submitting forms and documenting levy credits in case of the PPF requiring evidence at a later stage.

We continue to reiterate our three golden rules for smooth PPF certification which have applied in previous years:

  • Answer the exam question (the PPF’s guidance now includes more prescribed areas the PPF expects to be considered)
  • Engage early with the employer and guarantor
  • Keep records.

Trustees should ensure sufficient time to prepare ahead of Friday 29 March 2019 given the additional requirements introduced last year.

Please contact Matt Harrison to find out how we can help you.