PPF Levy 2021/22 Determination Consultation – Some good news for struggling employers (at least in the short-term)

by Angela Burns   •  

The PPF has released its consultation for the 2021/22 levy determination, proposing to collect £520m in levies – the lowest collection since 2006/7. This is in response to challenging times for employers as a result of Covid-19, but also in response to the PPF’s strong and robust financial position.

With the majority of the rules unchanged, there are two main significant proposals:

  1. Small scheme adjustment – reducing the levy for schemes with less than £50m in unstressed liabilities. The reduction will be 50% for schemes with less than £20m in unstressed liabilities, with a tapered reduction applying to schemes with liabilities between £20m and £50m; and
  2. Risk-based levy cap - reducing the cap on the amount of risk-based levy paid by individual schemes from 0.5% to 0.25% of unstressed liabilities.

Whilst these are fairly small changes to the overall determination, they are significant for clients that will be affected by them.

For a scheme with a (capped) PPF levy of £160,000 in the 2020/21 levy year – this would reduce to £80,000 under the proposed new guidance (all other things being equal).

Schemes with high levies that were close to the previous cap will also see their levy reduced under the new cap rules.

Small schemes will see a similar reduction.

This is welcome news for employers who are likely to be struggling the most at the current time.

Until 2023/24, the PPF will review its levy determination on an annual basis to ensure it remains flexible and strikes the correct balance between collection of levies and challenges faced by employers.

That said, the PPF is also managing expectations and flags the potential for levy increases in 2022/23 and future years.

The consultation closes in November with the new rules expected in January 2021.

Further reading

Government spending in response to Covid-19

by James Sweetnam   •  

Adding value for the PPF

by Julie-Anne Jones   •  

Lessons learned

by John Wilson   •  

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