delivering added and immediate value. Together Xafinity Punter Southall provide a complementary, best-in-class pension s
Xafinity Punter Southall The merged business will enhance our capabilities; this is good news for our clients
We are delighted to announce the formal completion of the acquisition of Punter Southall Group’s actuarial & investment consulting and administration businesses. This acquisition represents a significant step for Xafinity; we are now the largest ‘pure pensions’ consulting and administration firm in the UK. Why is this good news for you as our clients? Fundamentally, merging these businesses into ours is about growth, making things better and bringing innovative ideas and solutions to our clients: • It enhances our existing capabilities, by bringing together the very best of each organisation’s skills and experiences; • Our increased scale makes continued investment, in market leading technology and in our people, easier; • There is good cultural alignment with a “client first” approach and high levels of staff loyalty; and • The merged business has a wider geographic footprint with 15 offices across the UK that will help us to both serve our clients where you are and recruit and retain the best staff. The primary focus of Xafinity Punter Southall remains 100% client satisfaction and we plan to make the merger of our companies as seamless as possible for you whilst delivering added and immediate value. Together Xafinity Punter Southall provide a complementary, best-in-class pension service. We very much look forward to working with our new colleagues as we develop the Xafinity Punter Southall businesses over the coming months.
JANUARY 2018 In this issue... Xafinity Punter Southall | New PPF levy rules - play your cards right | Ben Fisher Awarded ‘Pensions Actuary of the Year’ by Actuarial Post Making Sense of Pensions
New PPF levy rules – play your cards right...
The majority of schemes will see a change in their sponsor’s Experian rating
Just before Christmas the PPF finalised a new set of levy rules which will apply for the next three years (referred to as the next “triennium”). The rules are largely in line with the PPF’s Autumn proposals, which means that schemes face a number of changes in the levy calculation. Perhaps most notably, there are significant changes to the Experian rating model which is used to place sponsoring companies in one of the ten insolvency risk bands.
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Schemes that face large levies or have seen a deterioration in their sponsoring company’s Experian rating may wish to flick through the deck and check whether there are any cards they can play to reduce their levy.
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With a new set of rules in place, schemes should revisit their levy reduction options
The PPF is aiming to reduce levies on average by 10%. However, with major changes to the Experian rating model, there are going to be winners and losers.
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Levy reduction options – what’s new Many schemes will have investigated the various levy reduction tools over the years and with a new set of levy rules in place, it may be beneficial to reconsider some of those options. The same levy reduction tools are largely available again this year but with some developments and notable features.
What to look out for • The PPF has introduced a number of concessions to make the certification of deficit reduction contributions and some contingent assets more straightforward, which may warrant reconsideration of these levy reduction options. • Schemes with Liability Driven Investment (LDI) strategies should check whether they would benefit from submitting a voluntary bespoke calculation of investment risk. • Schemes that have experienced a significant number of transfers out would be expected to see a more favourable PPF levy if they submit a new PPF-specific (Section 179) actuarial valuation. • The PPF has provided clarity on which entities can be categorised as a ‘Special Category Employer’ and hence, subject to the relevant certificates being provided, be allocated to levy band 1. Companies established by legislation and Governmental or equivalent companies may qualify.
Look out for the joker in the pack! What about the insolvency ratings themselves? Indeed, over the years lots of companies have taken what are often straightforward actions to improve their rating. With a new Experian rating model in place, now is a good time to investigate whether there are opportunities to improve the sponsoring company’s Experian rating.
Managing and improving your Experian rating – what companies can do • Check that the data held by Experian is correct. The small details can be really important and investigating the composition of the company’s rating has revealed errors in Experian’s records. • Understand which numbers in the accounts are used to calculate the rating – in some cases companies have options around how or what they report. • Check that the company is being allocated to the correct scorecard. Experian apply different scorecards based on the size and structure of the company and this can have a dramatic impact on the levy. • Where the company is being rated as a UK subsidiary of an overseas group, it is important to check that Experian are reflecting the correct parent entity. • Model the next set of financial statements to get a heads-up on the impact on the levy and what actions may be available.
There may be straightforward actions available to improve the company’s Experian rating
Highlights – new levy rules • Total Levy – the PPF aims to collect total levies of £550m. This is 10% less than the £615m it targeted for the 2017/18. • Experian scores and public credit ratings – the previously trialled changes to the employer scoring system are going ahead as planned. Employers with formal credit ratings will be placed in a levy band using their credit rating, rather than the Experian model and a large proportion of other employers will see their rating calculated using different financial metrics. Most companies’ ratings are set to see a change as a result; indeed, Experian have projected that only around 30% of employers will see their rating unchanged. • Score averaging – for the 2018/19 levy, Experian scores will be averaged over the 6 month ends from 31 October 2017 to 31 March 2018. The usual 12 month average will return for later levies. • Levy rates for Bands 1 to 4 – the levy rates for Bands 1, 2, 3 and 4 are being brought closer together. Levy rates will now start at 0.28 for band 1 (instead of 0.17 currently – a 65% increase) and rise to 0.40 for band 4 (as now). The idea behind this is to reduce the size of the steps up between those bands. • Reduced levy cap – the Risk-Based Levy cap is being reduced to 0.50% of smoothed liabilities (from 0.75% for the 2017/18 levy). • Contingent assets – the proposal to re-execute existing Contingent Assets has been postponed. Some re-certifications of the value of Type A contingent assets (parental guarantees) will now require reports to be prepared and submitted by a covenant specialist. • DRCs – the certification of deficit reduction contributions is being simplified. • S179 transformation – a revision to the way that assets and liabilities are ‘stressed’ (risk adjusted) which the PPF expects to reduce levies on the whole, but we have not yet been able to estimate just by how much. • Revised accounts – provided they are picked up by Experian by 28 February 2018, revised financial statements will be reflected retrospectively from the point the initial accounts were first captured in the Experian rating.
Ben Fisher awarded ‘Pensions Actuary of the Year’ by Actuarial Post We are delighted that Ben Fisher has been announced as the ‘Pensions Actuary of the Year’ in the Actuarial Post Awards 2017. Ben has been providing actuarial support to his clients at Xafinity since 2006, having joined as part of the graduate recruitment scheme. He is a key part of the actuarial team at Xafinity, providing ongoing support to new and existing clients and being an integral part of our growth strategy. Ben is also a strong supporter of recruiting young talent, having headed up the Actuarial Training Scheme for graduates and providing actuarial training across the business. At Xafinity, we are incredibly proud of Ben and his achievements; he adds value with both our clients and our staff , ensuring we stay ahead and continue our development. It is pleasing that his skills and enthusiasm have been recognised by other key industry professionals as providing a service that stands out. Ben has developed quickly while the business has grown, and we look forward to supporting him in the future. For further details, please follow this link http://bit.ly/2qFgcgQ Xafinity Punter Southall is a market leading actuarial, pensions and employee benefit consultancy providing a full range of consulting and administration services to over 1,200 pension schemes and sponsoring employers. We combine expertise, insight and technology to address the needs of both trustees and companies, specialising in pension de-risking solutions. Xafinity Consulting Limited. Registered Office: Phoenix House, 1 Station Hill, Reading, RG1 1NB. Registered in England and Wales under Company No. 2459442. Xafinity Consulting Limited is authorised and regulated by the Financial Conduct Authority. 950XC (1/18) Xafinity Consulting Limited is a wholly owned subsidiary of Xafinity plc, a company listed on the Main Market of the London Stock Exchange and registered in England and Wales under Company No.08279139
