The countdown is on to certify/recertify contingent assets for PPF levy purposes in time for the deadline of 5pm on on 31 March 2014.
Previously it was only possible to recertify a guarantee if it had been certified for the purposes of the levy in the previous year. This year it is now possible to recertify a guarantee if it has been certified/recertified within the previous 5 years and the underlying guarantee has been in place from that date.
This opens up options to recertify contingent assets which were not included in the levy assessment last year. Any contingent assets that may be appropriate for certification should be considered as a matter of urgency now given the approaching deadline. Certification of a contingent asset for these purposes can result in significant savings for a scheme in relation to its PPF levy.
Wording was introduced in the certification process in 2012/13 which required trustees to certify that they have "no reason to believe that each certified guarantor, as at the date of the certificate, could not meet its full commitment under the contingent assets as certified". Since this wording was introduced there have been a number of issues faced by trustees on whether they can properly provide such certification, where for example they are aware of a potential issue, even though they consider this is outweighed by positive factors.
This year's guidance introduced a "positive form" of certification that requires trustees to certify that they "are reasonably satisfied that each certified guarantor, as at the date of the certificate, could meet its full commitment under the contingent asset as certified, having taken account of the likely impact of immediate insolvency of all of the relevant employers".
The Pension Protection Fund have noted that the intention of the revised wording is to help trustees to focus on the actual resources that the guarantor has available to it to enable it to meet its obligations under the guarantee, as opposed to concentrating on finding issues that might prevent it from being able to fulfil the guarantee. As a result trustees need to be comfortable that the guarantor could meet its full commitment, but they are not required to be certain.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.