Articles - Time is running out for the PPF levy for 2017/18

Only a couple of months remain before the Pension Protection Fund’s (PPF) data cut-off point for the 2017/18 PPF levy. We highlight some of the things that can still be done to manage the size of your PPF levy before the 31 March 2017 data deadline, including one or two new methods introduced by the PPF.

 By Chris Ramsey FIA, Associate at Barnett Waddingham
 Experian insolvency scores
 Accounting standard change
 The headline in the 2017/18 PPF levy determination was the PPF’s decision to allow companies to certify cases in which their Experian score has been adversely affected by the change in the UK accounting standard.
 For companies that have moved to the FRS101 or FRS102 accounting standard from 1 January 2015, the PPF noted that, in some cases, this could have a negative impact on their Experian score. In particular, where the Experian scorecard considers the change in an accounting metric over a three-year period, the change to FRS101 or FRS102 could make this comparison inconsistent.
 In recognition of this, the PPF is allowing companies to submit an accounting standard certificate to Experian to remove any inconsistency caused by the change of accounting standard.
 FTE employee numbers
 On some of the Experian scorecards, a 'per employee' metric is considered when calculating the score. Companies generally disclose the total number of employees in their accounts, but the PPF allows companies to certify the number of Full Time Equivalent (FTE) employees so that this metric does not unfairly affect companies with a large number of part-time employees.
 Mortgage exclusion certificates
 The majority of Experian scorecards consider the age of the most recent mortgage or charge registered at Companies House. The PPF allows some of these mortgages to be disregarded when calculating a company’s score. For example, mortgages in favour of the pension scheme, mortgages that are deemed by the PPF to be immaterial, or the renewal of pre-existing mortgage (i.e. a refinancing mortgage).
 To disregard a mortgage from a company’s score, a certificate needs to be submitted to Experian and, if accepted, this can often significantly improve a company’s Experian score.
 It is worth noting that the PPF has expanded the conditions slightly this year, with new additions to the refinance and immaterial mortgage criteria. Further, immaterial mortgages must be recertified each year.
 Checking scores
 It remains important to ensure that Experian are calculating the Experian scores of your scheme’s sponsoring employers correctly.
 We would also recommend monitoring Experian scores over the year, so any unexpected changes can be spotted early and no nasty surprises surface when the PPF levy is eventually invoiced.
 Other levy mitigation strategies
 In line with previous years, there are a number of other options for reducing the size of a PPF levy. These include:
 submitting a Deficit Reduction Contribution certificate
 certifying contingent assets
 certifying Asset-Backed Contribution arrangements
 submitting an out-of-cycle section 179 valuation
 submitting a more detailed account of a scheme’s investment allocation in the Scheme Return
 Trustees and employers should discuss these issues with their advisers to ensure they are not paying more than their fair share of the PPF levy.

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