Pension Protection Fund Levy Certification 2020/21 – deadline soon
The deadline for trustees and sponsors to certify contingent assets to reduce their Pension Protection Fund (PPF) levy will soon be upon us. This includes group company guarantees (“Type A” contingent assets) and asset backed contribution (“ABC”) structures. Many will have received levy benefit from these assets in previous years but will need to re-certify them by 31 March 2020 to do so again.
We have guided many clients through successful PPF contingent asset certification and ABC valuation exercises. In 2019, we helped clients achieve levy savings of over £6m.
In December, the PPF released the ‘2020/21 Pension Protection Levy Policy Statement’ that largely maintained the levy rules applicable in 2019/20 with only minor changes (although more significant changes are expected for 2021/22).
As the PPF is expecting to collect £620m in levies, an 8% increase on last year, savings from contingent asset certification may be substantial for many schemes.
We can help you meet applicable requirements:
- Where the levy saving from a guarantee is over £100k, the PPF requires that trustees obtain a Guarantor Strength Report (GSR) to support certification
- Even where the levy saving is less than £100k, we recommend that a GSR is obtained to demonstrate that the trustees have considered all relevant factors before certification
- As we have seen previously, obtaining a GSR will improve the likelihood that levy credit is given should the PPF choose to review the certification at a later stage
We recommend that trustees take the following actions to ensure a smooth PPF certification process:
- Work with your advisors to estimate the potential levy saving to understand whether a GSR is required
- Engage early with the employer and guarantor to ensure relevant information is shared in good time
- Keep records of all steps in the process to evidence that a reasonable approach has been taken to the meet the PPF’s requirements. This will be increasingly important with the PPF having moved away from a ‘tick box’ approach, with more judgement required
We have seen examples of certification processes being left too late with unnecessary costs being incurred as a result, and trustees should ensure sufficient time to prepare ahead of Tuesday 31 March 2020. Therefore, we recommend commencing the process as soon as possible.
Contact Hamish Reeves to find out more, T: 020 3889 6322