Will you be ready for the March 2016 contingent asset submission deadline? Following the publication of the PPF’s draft levy determination for the 2016/17 levy year, we look at what questions you should be asking now to ensure you are prepared for the deadline.
September 2015 saw the publication of the PPF’s draft levy determination for the 2016/17 levy year, in addition to updated guidance in relation to certification of contingent assets. Timing is key to meet the 31 March 2016 submission deadline. Contingent assets can significantly impact the level of a scheme’s Pension Protection Fund (PPF) levy, but the associated deadline requirements for having a new contingent asset certified, or having a previously certified contingent asset recertified make it vital to be prepared well in advance of the deadline.
This is often complicated by the fact that each year changes are made to the contingent asset guidance. Luckily, this year the proposed changes appear to be minimal and indeed one of the changes appears to be beneficial to trustees (extending the deadline for submission to the PPF by seven hours until midnight as opposed to the 17:00 deadline as has been the case in previous years).
The confirmation that trustees are required to give has not been amended this year. As per the previous year, trustees certifying/recertifying a guarantee for the coming year are required to be able to make the following statement:
The Trustees, having made reasonable enquiry into the financial position of each certified guarantor, are reasonably satisfied that each certified guarantor, as at the date of the certificate, could meet in full the Realisable Recovery certified, having taken account of the likely impact of the immediate insolvency of all of the relevant employers (other than the Certified Guarantor where that Certified Guarantor is also an Employer).
Trustees should, of course, consider this statement afresh for the coming year and will need to make appropriate enquiries of the guarantor. When doing this, they should leave sufficient time for information to be provided and for a full and proper consideration of that information, including challenging and/or seeking clarification and taking appropriate advice as required.
The PPF previously published guidance on how they assess the strength of guarantors. This confirmed that there is no set list of factors that they take into consideration and what they consider to be relevant varies depending on circumstances.
What should trustees be asking?
When assessing guarantees trustees should not just be carrying out a general review of guarantor covenant. They are required to:
- Ensure that, in cash terms, the guarantor is “good for” the amount of the guarantee that they are certifying.
- Make proper enquiries to establish the financial position of the guarantor.
- Consider the impact of insolvency of the sponsoring employer on the guarantor.
- Consider all factors which may impact on the ability of the guarantor to meet the certified amount.
- Be able to demonstrate that they have challenged any assertions made by the guarantor and have taken appropriate advice where necessary.
For more information or advice, please contact our pensions specialists below.
Author: Vicki ThomasThis 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.