UK launches consultation on pension insolvency risk model

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The UK’s Pension Protection Fund (PPF), which underwrites insolvency risk for defined benefit (DB) schemes, launched a consultation in December on changes to the way the risk profile for DB schemes is calculated. An individual scheme’s score determines the annual levy it must pay to the PPF. 

The PPF is moving its insolvency risk provider to Dun & Bradstreet (D&B) for levy invoices issued in the 2021/22 levy year, with the first scores calculated using the new basis set from April 2020. Although the PPF-specific insolvency risk model currently in place will largely be adopted by D&B, a number of changes are proposed to ensure insolvency risk scores are adjusted to match actual insolvency experience. The PPF’s impact assessment indicates one in five of schemes will see levy increases, in particular schemes with employers on scorecard 1 (the largest employers). For some schemes, the increase could be over 50%.

The closing date for submissions to the consultation is 11 Feb 2020.

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Vicky Yu
by Vicky Yu

Associate, Mercer Wealth

Stephanie Rosseau
by Stephanie Rosseau

Principal, Mercer’s Law & Policy Group

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