PPF 2011/12 levy will drop to £600m

The Pension Protection Fund has confirmed it aims to collect an overall levy of £600m in 2011/12.

In its levy policy statement, the lifeboat fund says the significant reduction in the levy estimate from £720m in 2010/11 to £600m for 2011/12 resulted from the proposed move from RPI to CPI indexation.

The announcement confirms proposals the PPF began consultation on at the end of September.

The PPF also confirms it will set the levy scaling factor at 2.07 and a scheme-based levy multiplier of 0.000135.

It confirms the taper would start at 135% funding, there would be a risk-based levy cap of 0.75% of liabilities and says it would change how insolvency risk was measured.

It says it had made few new policy proposals for 2011/12 as it was consulting on significant changes for the years from 2012/13.

In the statement, PPF chief executive Alan Rubenstein (pictured) says: "It is likely that 2011/12 will be the last year in which the current formula will apply."

The PPF also publishes the final determination for 2011/12, which implements the changes.

Barnett Waddingham associate Ben Roach, Associate says the statement was expected but warned the levies charged to some schemes could be much higher.

He says: "The levies charged to some schemes will be much higher than last year, with 22% of schemes seeing an increase of more than 50%."

Roach explains: "Companies with high failure scores will be most affected as the PPF's assumed probabilities of insolvency have more than doubled for the strongest companies.

"The probability of insolvency is a direct input into the levy calculation and so a doubling of the insolvency probability means a doubling of the risk-based levy.

"These companies may want to reconsider their options for reducing the levy by 31 March 2011, such as paying deficit reduction contributions or putting in place contingent assets."