Pensions Bulletin 2018/38

Our viewpoint

“No change” for most as PPF announces 2019/20 levy proposals

The PPF has published a consultation document outlining its proposals for the 2019/20 pension protection levy.  Most schemes will notice little change this year.

The proposals, which are supported by numerous technical publications, result in the PPF expecting to take £500m in levies for 2019/20.  This is down from £550m in 2018/19, despite last year being a record year for claims against the PPF (and with an expectation that this record will be broken again shortly).

The major addition to the rules is a new regime for commercial consolidator schemes, with corresponding adjustments also made to the treatment of Schemes without a Substantive Employer (SWOSSs).  The proposal is broadly for commercial consolidators to be charged a levy that is the higher of:

  • The levy calculated using the usual formula, but with a single notional employer in Levy Band 10, a bespoke investment stress analysis and no allowance for voluntary certifications or the risk-based levy cap; and
  • The value of a European put option calculated using a variant of the Black-Scholes formula, with the strike price being an adjusted value of the liabilities and the spot price being an adjusted value of the assets

For 2019/20 any Type A (parental guarantee) or Type B (security over an asset) contingent assets with a fixed element in their liability cap must be re-executed on the new standard forms issued by the PPF in January 2018 (with minor updates in March 2018) and certified to be recognised in the levy.

Other amendments and confirmations include:

  • A new form for “exempt” Block Transfer certifications
  • Clarification of the exclusion of investment expenses from Deficit-Reduction Contribution (DRC) calculations
  • Confirmation that, to qualify for the simpler “Option Beta” DRC, the scheme must not retain any pension salary linkage
  • Clarification of the treatment of guarantees given by sponsoring employers; and
  • The PPF will write to existing Special Category Employers to ask whether there has been any change in their status, reducing the recertification requirements

The PPF has given itself an interesting and rather broad power to make changes to the Rules it feels necessary as a result of Brexit.  At this stage no account has been taken of the recent European Court of Justice ruling on the Hampshire case (see Pensions Bulletin 2018/36), which suggests PPF benefits should be at least half the value of full scheme benefits.

The consultation paper invites early suggestions for the levy rules in the next levy triennium, starting in 2021/22.  Consultation closes on 25 October 2018.


It is good news that the PPF is sticking to its “little change during a triennium” promise, accepting a £50m drop in expected levies despite a number of large schemes making their way/about to make their way into the PPF.

The proposed levy calculation for Commercial Consolidators is exceptionally penal if their funding levels drop significantly, but we believe the consolidators intend to have enough margin and mitigating actions in place that this shouldn’t happen.

Annual allowance pension savings statements deadline nears

By 6 October 2018 scheme administrators will need to have issued annual allowance pension savings statements for the 2017/18 tax year to those active members for which contributions into or accrual within pension scheme exceeds £40,000.  HMRC notes this – along with a request that administrators remind members who have exceeded their (personal tapered) annual allowance across all schemes for 2017/18 with insufficient carry forward that they must declare this on their self-assessment tax return – as part of the usual mix of articles in its latest pension schemes newsletter 103.

Other topics covered by the newsletter include:

  • A request for those scheme administrators who are still shown as inactive on the Pension Schemes Online service, and who will shortly receive a letter from HMRC, to log on and update their details so that HMRC can move them to the replacement Manage and Register Pension Schemes service
  • A reminder to administrators that if they pay pension benefits subject to PAYE on a quarterly basis, they need to be reported correctly through Real Time Information
  • An intention to fix in October the problem of P6 tax coding notices issued in error for death benefit payments that are entirely non-taxable; and
  • A reminder to administrators of relief at source pension schemes that their 2017/18 annual claim for relief at source needs to reach HMRC by 5 October 2018


More individuals accruing benefits will face annual allowance charges in 2017/18 than in any past tax year: the tapering of the annual allowance from 2016/17 impacts not just 2017/18 savings, it also reduces the unused annual allowance left from 2016/17 or before to cushion the blow.  But pension schemes won’t know who is tapered and indeed who has a charge.  More members will need to explore their annual allowance position than just those to whom schemes must send statements proactively.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.

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