Is your scheme last man standing?

Introduction

The PPF is concerned that schemes have been misreporting their structure. For this reason, all schemes that have identified themselves as last man standing (LMS) in their latest scheme return will receive an email from TPR, after 31 March 2015, requiring them to confirm that they have received legal advice regarding their structure. Schemes will have until 29 May 2015 to respond.

Key points

If trustees are unclear how their scheme structure should be categorised for the purposes of TPR’s scheme return, they should seek legal advice from their usual contact at Sackers as soon as possible.
Information on scheme structure will be captured from the scheme return as at 31 March 2015. Schemes have until then to revise their entries, if necessary.
Schemes which identify themselves as LMS in their latest scheme return will be asked to confirm that they have received legal advice regarding their structure. They will have until 29 May 2015 to respond.

What is a last man standing scheme?

LMS schemes are multi-employer schemes which do not have an option or requirement to segregate assets when a participating employer leaves.

Why is categorisation important?

LMS schemes receive a levy reduction because potential access to the PPF does not arise until the last employer becomes insolvent.

Until the levy year 2015/16, the discount was a flat rate. However, the PPF has identified that significant numbers of LMS schemes have a high concentration of membership with the main employer, limiting the reduction in risk to the PPF provided by the structure.

For this reason, for the levy year 2015/16, the LMS discount will be varied depending on the extent to which the scheme’s membership is dispersed across the employers. The greater the dispersal, the higher the discount that will be applied up to a maximum of the previous flat rate.

What do trustees need to do?

Information on scheme structure will be captured from the scheme return on 31 March 2015. Schemes have until then to revise their entries, if necessary.

Unless you are confident of your scheme’s structure for PPF levy purposes, we suggest you verify the position. If you are reporting as LMS, you will be required to confirm to the PPF that you have received legal advice regarding your structure.

PPF requirements

In order to obtain credit in the PPF levy for an LMS structure, the trustees must confirm that they have received legal advice on the scheme’s structure. If a scheme does not provide this confirmation it will not be treated as LMS for the purposes of the levy.

Broadly, the PPF requires the advice to be obtained from a solicitor who is in private practice (as opposed to in-house) and who meets the Solicitors’ Regulation Authority’s requirements for professional indemnity insurance and limitations on liability.

Timetable

Complete your scheme return within the required deadline.
Speak to your usual Sackers’ contact as soon as possible for advice on, or confirmation of, your scheme structure.
Scheme structure information will be captured from the scheme return on 31 March 2015.
If your scheme has identified itself as LMS, you will receive an email from TPR after 31 March 2015 requesting confirmation that you have received legal advice on your structure.
As soon as possible after receipt of TPR’s email, please contact us if you have not yet obtained legal confirmation of the scheme’s structure.
Provide confirmation to the PPF by 29 May 2015.