The PPF has announced that it expects the 2017/18 levy to total £615 million. This is the same as the original estimate for 2016/17, although the PPF expects individual schemes to see changes to the amount of their levy invoice. Most schemes are likely to see an increase unless mitigation is put in place – such as a contingent asset.
The PPF has consulted also on changes to the assumptions to be used in valuing protected liabilities for the purpose of calculating the PPF levy and for determining whether a scheme has sufficient assets to secure benefits outside the PPF. The PPF is responsible for keeping the assumptions up-to-date with estimated bulk annuity pricing, although, as a principle, they target the “competitive end” of the range of pricing. Following discussions with insurers they propose:
- separate post-retirement discount rates for pensioners and deferred members,
- changes to the yield indices used, to reflect more closely the actual liability duration of schemes that are eligible for the PPF, and
- updated mortality assumptions.
The change that will have the most significant effect is the change to mortality assumptions. PPF estimates that, for the average scheme, the value of pensioner liabilities will fall by about 5% and that of deferred liabilities by about 3%. There will be no impact on PPF levies, however, until the 2018/19 year.