Winners and losers from the PPF levy changes - PwC comments

The Pension Protection Fund (PPF) – the lifeboat pension fund for defined benefit schemes – has today announced a new method for calculating the annual charge levied on schemes.  The levy amount partially reflects the risk of insolvency and can be millions of pounds for some companies.  The insolvency risk score behind this is moving to a bespoke model made just for the PPF, and will rely more heavily on audited financial data than in the past. You can find more information here: http://www.pensionprotectionfund.org.uk/News/Pages/details.aspx?itemID=366

Jonathon Land, PwC’s pensions credit advisory leader, said:

“The really important change is the individual amounts which schemes will have to pay, with many winners and losers along the way due to this new methodology.  Schemes likely to see a hike in their levy will be those that heavily relied on non-financial data in the past to calculate their insolvency score.  For some schemes, this could mean a material increase to their annual levy which could put significant financial strain on the company supporting the pension scheme.

“The new methodology means that schemes can no longer hide behind non-financial measures of insolvency risk, so the levy for weaker performing companies will truly reflect their financial data."