UK Pensions - Time to take action on PPF contingent assets

Trustees and employers of defined benefit (DB) pension schemes need to take action by 5pm on 31 March 2019 if:

  • they are thinking of putting in place a contingent asset (or have done so since 31 March 2018) with a view to reducing their 2019/20 PPF levy; or
  • they have already put in place a contingent asset which had the effect of reducing the PPF levy in a previous year and wish it to continue to do so for the 2019/20 levy year.

If the required action is not taken by 5pm on 31 March 2019, the 2019/20 levy will be calculated without regard to the relevant contingent asset.

Background

The PPF will recognise the following contingent assets as qualifying for a reduction in the scheme's levy if they meet the PPF’s requirements and have been certified correctly by the relevant deadline:

a parent or group company guarantee (Type A);

  • security over cash, real estate or securities (Type B); or
  • a letter of credit or bank guarantee (Type C).

The key requirements are that:

  • the agreement must be based on the PPF’s standard form documents;
  • the agreement must be submitted to the PPF (along with other required documents and certifications from the trustees); and
  • the trustees must re-certify the contingent asset annually if it is to continue to be taken into account for the purposes of the next year’s PPF levy.

All these requirements continue to apply. However, this year there is an important additional requirement for schemes with existing Type A or Type B contingent assets that include a fixed sum maximum amount element.

Contingent asset re-execution
Schemes with existing Type A or B contingent assets that include a fixed sum maximum amount element will need to re-execute them in the revised standard form currently available on the PPF’s website in order for them to be recognised in the levy calculations for 2019/20. The revised standard forms were published in January 2018, so any scheme which entered into this type of contingent asset before then will need to take action.
 
The re-executed versions must be certified by 31 March 2019 (and hard copies must then reach the PPF by 5pm on 1 April 2019), if they are to be recognised in the levy.
 
For more information, please speak to your usual Linklaters contact.