TPT supports the PPF’s decision to reduce the regular levy to zero in response to its significant £14bn surplus but raises concerns over the decision to continue to charge the levy on superfunds.
Last year, TPT announced its intention to launch the UK’s first TPR-assessed run-on superfund. Since then, reports have suggested that a number of other workplace pension providers are also interested in the superfund space.
The PPF’s decision to continue charging the ACS (Alternative Covenant Scheme) levy, which applies to schemes without a substantive employer covenant that can instead be supported by a capital buffer – this includes superfunds – does not proportionately reflect the risk superfunds pose. Schemes entering superfunds must be able to demonstrate an increased probability of benefits being paid in full. This, TPT says, means that superfunds “by definition, represent less risk than regular DB schemes”. Furthermore, the availability a capital buffer will “put schemes in superfunds in a stronger funding position than regular DB schemes”.
TPT also opposes a continuation of the ACS levy on grounds of fairness, noting that regular schemes and members will now benefit from the zero levy, but those moving to a superfund will not – despite having paid the levy (helping accumulate the surplus) until the transaction. Ultimately, a superfund will make entry more expensive for members, schemes, and sponsors alike.
Ruari Grant, Head of Policy and External Affairs at TPT Retirement Solutions, said: “The PPF’s decision to reduce the regular levy to zero makes complete sense, but there’s no reason the same logic can’t be applied for superfunds. These schemes are to be held to a very high level by the Regulator and will therefore pose minimal risk to the PPF.
“We are aware PPF is wary of future models emerging which may pose more risk, and of the risk were superfunds to reach ‘significant scale’. However, we’d urge them to take a more proportionate approach for the market that currently exists, and remain flexible in future – rather than risking stifling growth and innovation at the outset.”
PPF Levy Consultation 26/27
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