An increase to the Pensions Protection Funds levy for large employers expected in 2021

23 December 2019

 

The Pension Protection Fund (PPF) levy is paid by all eligible defined benefit schemes to help fund PPF protection. As a result of proposed amendments to the levy risk assessment model, larger payment may be required from some of the bigger companies, due to changes that will take effect from tax year 2021-2022.

Pensions Expert reports that the PPF will no longer utilise Experian for its insolvency risk model but will start using Dun & Bradstreet (D&B) to model insolvency risk for levy calculations. The risk scores for the 2021-2022 levy will be amended to mirror actual insolvency experience.

Although D&B’s new model is a modified version of the one initially used by Experian, tests that looked at its performance indicated that the scorecards originally used were incorrectly predicting the level of insolvencies. This trend was prevalent in the scorecards used for larger companies. The scorecard variables that will be used are to be adjusted accordingly, and this will see increased levies for bigger companies but will also mean decreases for smaller businesses and for not-for-profit establishments.

The PPF commented:

“We regard the case for recalibration as very strong, since otherwise smaller entities and not-for-profits would be subsidising the largest employers.”

According to the document, a third of schemes will see a similar amount of levy in 2021-22, with almost half of the schemes seeing a lower charge. One in five schemes will see an increase, in particular, those with employers on ‘scorecard 1’.

The risk scores that have been calculated by D&B will be available for levy payers to view online, on a new digital portal, which will also offer the facility for those affected to ask questions online and also to engage in live webchat with customer service advisors.

 


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