Pension Protection Fund SME Forum Explained
25th March 2021
The legacy of managing and funding Defined Benefit Pension Schemes is a challenge that many family businesses face. As part of the IFB's work to help support and improve the landscape for family firms we have actively involved in an initiative established by the Pension Protection Fund - the body in charge of the levy - to better understand the challenges businesses are facing, and improve communication between employers and officials.
In this guest article David Taylor, Executive Director and General Counsel at the Pension Protection Fund, explains how the SME Forum has made a real impact on the work of the PPF.
Back in December 2018, we announced our intention to set up an SME Forum. We wanted to improve two-way communication between the PPF and those DB schemes with small and medium sized employers. We took this decision in part following the results of research we’d commissioned, which showed that smaller schemes were more reliant than larger schemes on communications direct from the PPF, and that the PPF could do more to consider and support trustees of small schemes.
It’s really important to us that we understand the issues facing our customers, and that when we provide information, it is in a format and language that is accessible. So right from the start we were absolutely committed to making the Forum a genuine channel for two-way communication, for sounding out ideas and hearing feedback.
We wanted to give SMEs the space to express their views directly to us, and for them to have confidence that those views were being heard and their feedback taken into account.
Of course, the success of the Forum wasn’t only dependent on what we wanted. We needed interested DB schemes with small and medium sized employers to sign up, and engage. We issued a call for potential members, and crossed our fingers that the industry would respond.
We’re now just over two years on, and I’m really pleased that the Forum has become part of the fabric of the PPF’s way of working. Our call for members resulted in a membership of 25 external bodies, representing SMEs, professional bodies (of which the Institute for Family Business is one) and advisors to SMEs with DB schemes. This February, we held our sixth regular meeting. These are an opportunity for members to share their concerns and comments on our ideas for the PPF levy and wider issues affecting pension schemes – but our engagement doesn’t stop there. We’ve also worked with Forum members in ad hoc focus groups outside the regular meeting cycle. For example, members have helped us further improve our corporate website section on the levy, and refresh and refine our payment plan policy.
We found it particularly helpful, as we considered and developed the levy rules for 2021/22, to be able to talk to Forum members about the impact that COVID-19 was having on their businesses. Building on what we learned from hearing their first-hand experience, we first proposed, and then confirmed, measures in the rules which we believe will provide effective support to SMEs with DB schemes, while allowing us to maintain a risk reflective levy. These measures are:
- a small scheme adjustment, which halves levies for schemes with less than £20 million in liabilities, and tapers levies for schemes with between £20 million and £50 million of liabilities
- a reduction in the risk-based levy cap to 0.25 per cent of liabilities from 0.5 per cent
We’ll continue to build on the insight the SME Forum brings to us, as we monitor the impact of COVID-19 on schemes and sponsors to consider what, if any, changes to our rules will be needed in future years.
The Forum is constantly evolving, and we’re still happy to welcome new members. Anyone representing a DB scheme with a small or medium sized employer who would like to take part in the Forum should email the PPF's Stakeholder Manager email@example.com to register an interest.
Quotes from SME Forum Members
“It gave us lots of opportunities to raise points”
“The discussions seem to be well received on both sides…we found it a useful addition to our means of communication with the PPF.”
“The atmosphere allowed real and meaningful feedback.”
“The PPF has listened and taken into account what SME stakeholders have been saying. And where they can move, they’ve moved. The small scheme adjustment has been a most welcome relief and has turned the levy into a much more manageable cost.”
“Thank you for the time put in to understand the points we have made.”