PPF levies 2015/16: make sure your scheme isn’t overcharged - Towers Watson
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Joanne Shepard, Timon Kotsapas and Mark Alexander 10 February 2015 © 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. PPF levies for 2015-16 and beyond Make sure your scheme isn't overcharged
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Transcript of PPF levies 2015/16: make sure your scheme isn’t overcharged - Towers Watson
Joanne Shepard, Timon Kotsapas and Mark Alexander10 February 2015
© 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
PPF levies for 2015-16 and beyond
Make sure your scheme isn't overcharged
Agenda
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Key aspects of detail:
Contingent Asset guarantees
Reminder of deadlines
Key changes for PPF levies for 2015/16
Experian scores
Asset Backed Contributions
Questions
Unstressedliabilities
New Money Purchase definition
Last-man standing
adjustment
Asset Backed
Contributions
Contingent asset
guarantees
Scheme-basedLevy
Multiplier
Underfundingrisk
Insolvency Risk
Risk-based Levy Scaling
Factor
Changes to levy calculation methodology for 2015/16
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Other changes:
Scheme based:
Risk based:
X
X X
Contingent asset guarantees: certification requirements
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The Trustees are reasonably satisfied that each guarantor could meet the REALISABLE RECOVERY having taken account of the immediate insolvency
of all of the employers
The PPF will review proportion of guarantees each yearThe PPF will review proportion of guarantees each year
Covenant advice may be requiredCovenant advice may be required
Cover “Underfunding Risk”?Cover “Underfunding Risk”?
Possible penalties where this is largePossible penalties where this is large
Realisable recovery
Can Experian scores be improved?
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Based largely on financial information and cannot be improved
Misleading perception
Based largely on financial information, but may still be significant scope for improvement
Correct understanding
69% of clients we advised on Experian scores identified levy improvements of several £m
Shareholders funds
Return on Capital
Creditor days (sales based)
Change in employee remuneration
Mortgage age
Parent Strength
0% 5% 10% 15% 20% 25% 30%
credit given potential
Which variables to focus on?
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Scorecard: Full Accounts <£10m turnover
This analysis allows actions to focus on the variables that have a poor scoreThis analysis allows actions to focus on the variables that have a poor score
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Credit gained
Levy reduction if score was
100%55% £310,000
14% £191,000
24% £310,000
14% £365,000
0% £191,000
100% N/A
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Key actions
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Review the information on the portal
Can mortgages be excluded?
“Improve” number of employees
Case studies
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l Number of employees: 2,388
l Number of employees picked up: 0
l Emailed Experian
l Improvement was backdated
l Levy saving: £31,000
Case study 1 –Oil & Gas • US Company
l Default mortgage treatment
l Company does not have an investment grade credit rating, but 3 other Companies in the Group do
l Client will be submitting a certificate
l Estimated levy saving of £300,000
Case study 2 –Financial Services
Next steps
l Do it yourself using the PPF/Experian portall Ask for support from TW
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Asset Backed Contributions (ABCs)
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Value of ABCs will be removed from assets used for S179 / block transfer valuations
Annual valuationsAnnual valuations
Legal advice Legal advice
Duty of careDuty of care
Certification Other impacts:
Previous deficit reduction contributions ignoredPrevious deficit reduction contributions ignored
Block transfersBlock transfers
Key deadlines
Deadlines and key dates31 October 2014 to 31 March 2015 Experian ratings
31 March 2015 – 5.00pm
Information on Exchange
Contingent assets certificates
PPF valuation reflecting new money-purchase definition
Mortgage certificates
ABC certificates
30 April 2015 – 5.00pm Deficit reduction certificates
29 May 2015 Legal advice on LMS status to tPR
30 June 2015 – 5.00pm Full block transfers
Autumn 2015 Levy invoicing starts
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Questions
Mark Alexander
Phone: +44 (0) 161 833 [email protected]
Timon Kotsapas
Phone:+44 (0) 20 7227 2280 [email protected]
Joanne Shepard
Phone:+44 (0) 20 7227 [email protected]
Appendix – Mortgage/charge exclusion criteria
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© 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Rent deposit deeds1
Charges in favour of the pension scheme2
Refinancing on better or equal terms3
Less than 0.5% of total assets4
Company has investment grade credit rating5
A company in the Group has an investment grade credit rating and no other company in the Group has a sub-investment grade credit rating6
If your Company meets one of these criteria, you will need to submit the relevant certificate. The certificates are available inthe guidance relating to mortgages on the PPF/Experian portal (www.ppfscore.co.uk) and we have also given a link belowhttp://www.pensionprotectionfund.org.uk/DocumentLibrary/Documents/1516_mortgage_guidance.pdf
Appendix – Experian bands and guarantor adjustment
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New Experian levy bands and rates
Range of Pension Protection Scores
Levy Band
Levy Rate
0.000% <0.030% 1 0.17%
0.030% <0.049% 2 0.23%
0.049% <0.086% 3 0.30%
0.086% <0.143% 4 0.40%
0.143% <0.243% 5 0.53%
0.243% <0.488% 6 0.81%
0.488% <1.049% 7 1.26%
1.049% <1.595% 8 1.76%
1.595% <2.986% 9 2.39%
2.986% 100.000% 10 3.83%
Adjustment to Experian band for guarantors
Realisable Recovery(proportion of assets)
Increase in Levy Band
< 10% No change
10% to < 50% One
50% to < 100% Two
100% or more Three
No adjustment is made to the Levy Rate where the guarantor is the Ultimate Parent
of all the participating employers
