PPF Levy Policy - A New And Improved Formula?

This week, the Pension Protection Fund ("PPF") confirmed its proposed levy policy for 2012/13 and beyond.   It is designed to mark a shift in emphasis from employer covenant towards scheme funding in the levy calculation, and to allow schemes and employers to benefit from a more transparent and stable levy bill. A pension scheme's risk-based levy will still be calculated by reference to underfunding multiplied by employer insolvency risk, but within that basic formula there are a number of innovations.

Core features of the new regime

The building blocks of the new approach are as follows:

• the main levy parameters (the risk-based levy scaling factor, levy cap and scheme-based levy multiplier) will be fixed for 3 years, although there is a safety valve allowing the PPF to depart from this in certain circumstances