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View the related practice notes about Contingent assets

Contingent assets and the Pension Protection Fund

FORTHCOMING DEVELOPMENT: In its consultation paper published on 12 September 2024, the PPF proposes:• a levy estimate for 2025/26 of £100m (the same as for 2024/25, which is the lowest levy ever and is consistent with the approach consulted on last year)• changes to its methodology to allow the PPF to continue spreading the cost of the levy across a broad pool of risk-based levy payers (rather than allowing the levy to become concentrated on a smaller group). In particular, the PPF proposes to (i) reduce the levy scaling factor so that the PPF doesn’t collect more than the £100m planned, (ii) increase the scheme-based levy multiplier to ensure maximum utilisation of the scheme-based levy, and (iii) increase the asset and liability stresses used to two standard deviations • to make it simpler for schemes to get levy credit for deficit reduction contributions (DRCs)The PPF expects that these changes will have a limited impact and that schemes will pay broadly the same scheme-based levy as in 2024/25. Of the 37% of schemes...

Assessing and monitoring the employer covenant

STOP PRESS: On 4 December 2024 the Pensions Regulator (TPR) finally published the updated employer covenant guidance for trustees of DB pension schemes, aligned with its new DB funding code of practice which was brought into effect on 12 November 2024 by the Pensions Act 2004 (Code of Practice) (Defined Benefit Funding) Appointed Day Order 2024, SI 2024/1143. Described by TPR as ‘the last piece of the jigsaw to help schemes carry out valuations under the new DB funding code’, the updated guidance includes the first regulatory definition of employer covenant aiming to provide greater market certainty and promote consistency across schemes. Key updates encompass cash flow analysis, reasonable affordability assessments, maximum affordable contributions, reliability periods, covenant longevity, and contingent assets. The updated guidance emphasises proportionality in covenant assessments and includes worked examples for complex areas. Significantly, TPR expects trustees to use the updated guidance to review whether their existing covenant analysis is focused in the right areas and remains proportionate, especially where trustees have experienced significant changes in their...