PPF unveils new pension protection levy formula

The Pension Protection Fund (PPF) has unveiled proposals for a new formula which will be used for calculating the pension protection levy from 2012/13 onwards.

These proposals were developed in conjunction with a steering group of industry figures which published its conclusions about the future of the levy earlier in the year.

PPF Chief Executive, Alan Rubenstein, set out details of the new formula at the National Association of Pension Funds' annual conference being held in Liverpool.

He said: "With these proposals, we aim to have a robust levy that is fit-for-purpose and which, we believe, will be generally accepted by levy payers. We consulted widely, both formally and informally, on this issue and worked closely with senior industry figures to make sure we achieve that aim.

"We believe these proposals address key priorities highlighted by the industry about greater predictability and stability of levy bills - and provide an increased focus on factors levy payers can control, allowing them to plan more confidently for the future.

"Also, the levy plays a crucial role in helping us meet our target of becoming financially self-sufficient by 2030 and these proposals, we believe, will make sure we stay on track to achieve our funding aims."

Under the proposals, the PPF plans to fix the levy rules for three years at a time to provide greater predictability, although these could be reviewed in exceptional circumstances.

To increase stability, it proposes to use average measures for both underfunding and insolvency risk. This means that any temporary changes in an employer's insolvency risk score, or pension scheme's funding position, would not disproportionately affect a pension scheme's levy bill.

The new levy formula will also focus more on factors in the levy payers' control, rather than those factors they have little influence over. So, there will be greater emphasis on funding positions and investment risk.

These proposals are subject to a further consultation which runs until 20 December.