PPF Levy rules for 2021-22

29th January 2021

The PPF has issued the final levy rules for the 2021-22 year.  This would be the first year of a new triennium, when the levy rules would be, largely, fixed for the next three years.  However, in light of the Covid-19 pandemic, the PPF has decided to look at one year at a time until 2024.  The highlights for 2021-22 are:

• the estimate of the levy to be collected for 2021-22 is £520m – a drop of £100m on the 2020-21 estimate;
• the cap on an individual scheme’s risk-based levy will be reduced from 0.5% to 0.25% of the scheme’s protected liabilities;
• there will be a small scheme reduction, that will halve the levy for schemes with under £20m in protected liabilities, and the reduction will be tapered so that only schemes with £50m or more in liabilities will be charged in full.

The small scheme reduction is expected to be a permanent feature of the levy going forward, recognizing that small schemes pose less of a risk to the PPF and are less able to afford professional advice on ways of reducing their levy.  By contrast, the levy cap will be kept under review.  It is worth noting, however, that the anticipated rise in overall insolvency risk, resulting from the pandemic, may increase the overall levy required in future years.

Insolvency scores for the 2021-22 levy will be calculated using Dun & Bradstreet data under the PPF’s new contract with them.

The PPF’s current practice is that monthly insolvency risk scores are moved to 100% when an insolvency event, or equivalent, occurs.  The PPF has considered whether this should happen also when a company enters a moratorium or a restructuring arrangement under the new Corporate Insolvency and Governance Act but has concluded that the appropriate treatment is to apply levy band 10 (ie the highest risk of insolvency) but not 100% probability of insolvency.  It expects to make this change for the 2022-23 levy year.