PPF contingent assets to be re-executed by March deadline

Contingent assets can reduce the risk that an insolvency event results in a claim on the Pension Protection Fund (PPF), or reduce the size of a claim if one occurs. In order for a scheme (and its members) to benefit from a reduction in its risk-based PPF levy, the scheme’s contingent assets must use the standard PPF documentation and satisfy the requirements of the Levy Rules.

In January 2018, the PPF issued revised standard form agreements for contingent assets and indicated that schemes using the old contingent asset documentation would have to re-execute their agreements on the new standard forms for levy year 2019 – 2020 if they are to continue to be recognised for a levy reduction.

The Board of the PPF are currently consulting on the rules for the 2019-2020 levy year, which they expect to finalise in December 2018. The consultation proposes for the following contingent asset agreements to be re-executed in order for them to continue to be recognised for levy reduction:

a) Type A contingent assets (parent or group company guarantees); and

b) Type B contingent assets (charges over cash, land or securities), which include a fixed sum element in the cap. 

There is no such requirement where the cap is floating by reference to a measure of the scheme’s funding level.

Therefore, schemes with either Type A or Type B contingent assets based on the old (i.e. pre January 2018) standard forms and that contain a fixed sum element in the cap would need to ensure these are re-executed on the new standard forms by the levy deadline if they are to be recognised for the 2019/20 levy.

The proposed levy deadlines are 31 March 2019 for online applications and 5pm on 29 March 2019 for hard copy applications.

Where these contingent assets are not re-executed and certified as a new or re-certified contingent asset by these deadlines, the PPF Board intend to not allow any levy credit to be given.