Pension Protection Fund, London, has set its levy estimate at £550 million ($746.8 million) for fiscal year 2019, more than 10% lower than the estimate for fiscal year 2018, the current fiscal year.
The PPF is the lifeboat pension fund for the defined benefit funds of insolvent companies in the U.K. Corporate firms pay the levy to the PPF each year.
The PPF, which has £28.7 billion in assets, also said in a news release that it will implement the majority of the proposals for fiscal year 2019 with which it consulted with the industry, with limited change.
The proposals include the use of credit ratings and the Standard & Poor's credit model for regulated financial institutions in the PPF's model for assessing insolvency risk. It will also ensure all scorecards used in its assessments are specific to the size of a company.
The pension fund is also seeking views on additional proposals, including an improvement to its assessment of underfunding. The news release said these changes will collectively improve the risk reflectiveness of the levy, and, were they in place now about two in every three pension funds would have paid a lower fiscal year 2018 levy. Around one in five funds would have experienced an increase.
Also, between now and Nov. 1, the PPF will consult on additional proposals and draft rules for implementing the levy for fiscal year 2019, which starts April 1, 2018.
"When we set out our initial proposals for the next three years, we noted the particularly challenging environment in which the PPF is operating," said David Taylor, general counsel at the PPF, in the release. "Six months on, a high degree of political and economic uncertainty persists and scheme deficits remain high."
"However, while the risks we face are significant, we're in a strong financial position and we're still on track to meet our long-term funding target." Mr. Taylor said this has enabled the PPF to set a lower levy estimate than last year.
Pension fund trustees and employers can view and check their data and scores on the PPF Score website beginning in early October.
The consultation document on the additional proposals is available on the PPF website.
