Key features of the new framework include fixing levy rules for three years to provide the certainty levy payers have asked for, averaging funding levels so that short-term volatility in financial markets is not reflected in the measure of underfunding risk and reflecting investment risk in the levy calculation for the first time, and
The PPF has pledged to implement a system of ten insolvency rating bands, an increase from the six originally proposed. This responds to industry concerns that six bands would create 'cliff-edges' where schemes could possibly face large levy rises.
PPF chief executive, Alan Rubenstein, said: "This marks a significant milestone on our journey to construct a levy which is fit for purpose in the long-term.
"We have worked closely with all our stakeholders in industry and elsewhere and we are grateful to everyone for their contributions. In particular, I would thank members of the industry steering group, set up to help us develop this framework, for their invaluable guidance throughout.
"We are now embarking on the second leg of our journey - making sure the new framework is implemented successfully."
Responding to the PPF Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said: "This is a step in the right direction. It establishes a clearer link between a scheme's overall health and the amount of the levy it has to pay.
"The approach the PPF has adopted will provide greater certainty and predictability for schemes. And it is right that the levy should be reduced where a scheme takes positive steps to reduce its risk to the PPF.
"But we now need to study the details carefully. There is a concern about the costs of the new investment risk calculation for larger schemes. And some schemes with very good insolvency ratings will see their levies rise.
"The NAPF will be analysing the full details of the PPF's finalised framework and will work closely with the PPF on its implementation."
Bligh, CBI principal policy adviser, added: "Business asked the PPF to make the levy more stable and predictable over time, and we hope by fixing levy rules for three years this model will achieve that."
On the introduction of a system of ten insolvency rating bands, four more than was originally proposed, Bligh said: "The PPF's initial proposal over-simplified companies' risk profiles, so it is good it has adopted a more realistic assessment of firms' insolvency risk, which better reflects the reality of whether or not their scheme might end up in the lifeboat fund."
Accompanying this announcement is a consultation on the PPF's draft guidance on how to calculate a bespoke measurement of investment risk. Comments on this should be submitted by 24 June 2011.
