FD Intelligence

PPF Levy - 2017/18 Consultation: key points

In September this year, the Pension Protection Fund (PPF) published its consultation for the upcoming 2017/18 levy year.

The consultation reflects upon the PPF's experiences from the last two or three years and details the changes it plans to make for the 2017/18 levy year, as well as setting out the draft determination.

It is always important to actively manage the costs of running a pension scheme. The PPF sends levy invoices to the pension scheme, but crucially it is the company who pays the bill.

However, understanding how the levy is calculated and how any proposed changes could affect the employer as soon as possible could save companies significant amounts of money.


Three years ago, a new supplier, Experian, was appointed to supply the insolvency risk data for sponsoring employers. The PPF have confirmed that they are satisfied that this has led to more predictive and transparent solvency risk assessments.

That said, they have also acknowledged the feedback they continue to receive suggesting ways that the levy invoice process could be improved further. As a result, they are now proposing a number of changes to the levy determination in advance of the 2017/18 PPF levy year, the most significant of which are as follows:

  • Certain employers will be able to certify an adjustment to allow for the effects of FRS102
  • Ultimate parents may be able to be assessed under an alternative scorecard
  • Monthly scores will be calculated from the original submission date for restated accounts
  • A single credit rating agency certificate can be submitted for multi-employer schemes
  • There will be more possibility to exclude some immaterial and refinance mortgages
  • There will be changes to exchange rate methodology where required
  • The scaling factor and multiplier will remain unchanged at 0.65 and 0.0021% respectively
  • V7 of the S179 guidance will continue to be used
  • Annuity valuations included in scheme accounts will be allowed for
  • More details on each of these issues are provided on the reverse.

The Grant Thornton UK view

The most significant change in the PPF’s 2017/18 consultation is the transitional relief available for employers where the adoption of the new UK accounting standard, FRS 102, would otherwise cause an artificial movement in their levy rating.

It's important for employers on the large and complex or not-for-profit scorecards to understand the effect of FRS 102 adjustments on their accounts and identify any negative impact on their levy to avoid being potentially penalised unfairly. 

Employers can then submit certifications outlining the adjustments to the PPF in advance of the 31 March 2017 deadline.

Insolvency risk measurement changes

The PPF's goal in this consultation is basically to maintain stability, so none of the additional proposals we have set out below are actually expected to result in significant changes for most levy payers.

However they will impact some levy payers more than others:

  • 'large and complex' and 'not-for-profit' employers will be able to certify an adjustment that should be made to reflect the FRS102  impact on the figures used to determine the change variables
  • ultimate parent companies submitting consolidated accounts can now be assessed under the 'Independent Small' scorecard where this is more relevant
  • when accounts are re-stated, monthly scores will be re-calculated from the date the original accounts were filed rather than the date of re-statement.
  • for multi-employer schemes, a single Credit Rating Agency certificate can be submitted on behalf of more than one employer.
  • there will be more grounds for immaterial and refinance mortgages to be excluded
  • exchange rates used will be as at the balance sheet date and the same rate will be used for previous year's accounts where needed to determine variables.

Other policy issues

The PPF have also confirmed the following:

  • the levy scaling factor and multiplier will remain unchanged at 0.65 and 0.0021% respectively
  • v7 of the S179 valuation assumptions guidance will continue to be used as the output date basis despite the potential introduction of v8
  • where the S179 valuation date is before 31 December 2015 and the asset breakdown provided is on or after this date, the 'non-accounts insurance assets' will be set to zero to reflect the inclusion of annuities in pension scheme accounts for years commencing 1 January 2015 onwards.

In addition there will be some minor amendments to wording to clarify certain areas of determination.

Going forward

The PPF have provided the following timeline for their review and determination of revised rules:

  • the consultation closed at 5pm on 31 October 2016 and finalised rules will be published by December 2016.

Contact us

Our PPF team has a combination of accounting and actuarial expertise to analyse the financial information of both the employer and the pension scheme. This allows us to understand the detail behind every single employer and scheme variable and how changes to these can impact on the levy, now and in future.