PPF formulae

PPF on a roll

It is easy to see why the pensions minister called for more professional trustees given the latest PPF levy demands. The demand notice is clear, straightforward and in the case of a small well-funded scheme, the amount demanded is not unreasonable. The PPF should be pleased with itself on the layout and tone, although the additional charges for late payments are unreasonably expensive and penal, being base rate plus 5%. But you need to have some serious maths to understand the levy calculations. The risk -based levy for example is expressed in a case this month as

U (underfunding) = the greater of (L – A – D) and (UL – UA – D)

= the greater of (￡81,389,490.21 - ￡117,186,830.89 = ￡0.00) and ￡75,167.932.66 - ￡102,097,510.32 = ￡0.00)

= the greater of –￡35,797,340.68 and –￡26,929,577.66?

= Max (– ￡26,929,577.66, ￡0.00)

= ￡0.00

Me neither, but it’s bound to be right. It would be a brave commentator to argue that the numbers for the SLM (Scheme based levy multiplier) being 0.000021, the LSF (scaling factor) being 0.48 and the K (risk-based levy cap) being 0.0025 are incorrect. It is calculated to the penny, which may suggest an element of spurious accuracy and the system as a whole would not have been possible before calculators. Despite its clarity of presentation, it might be hard to explain the mechanics to a select committee or a trustee, even a professional one. The good news is that it looks like we can ignore the brain-bending calculations in few years once the PPF becomes self-sufficient as predicted in its funding plan.

PPF operating costs are around ￡53 pa per member, which seems good value; very large pension schemes in the private sector seem to cost about three times that. But it faces some longer-term challenges:

·???????It may need to ease its claim for credit for supporting members of closed schemes, and instead give credit where it is due; it is in fact UK industry that runs pension schemes that pays for it all. The PPF is merely a (well-run) vector.

·???????The claim that the PPF will be self-sufficient by the end of the decade is comforting in a way, but provokes the concern that if there are no future premiums (ie levies) the implication is that levies in the past have been too high. Who will get the benefit if, for example, there is a surplus in the PPF? And maybe there should be a negative levy if our pension scheme is over-funded.

·???????It still has not managed to co-operate with HMRC and TPR so as to have one central reporting system for pension schemes. It would be good if they talked to each other and made life simpler for the rest of us.

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Not only pensions

If we sometimes despair at the never-ending stream of stuff from TPR, FCA and DWP, we might also spare a thought for those of us who drink tea. October 14 is World Standards Day, which might have been a useful day if only the world standards organisations had managed to organise a universal electrical plug and socket (of which there are 15 types currently around the world) or phone and computer charger (although USB-C is getting there without any formal standards). Its sponsoring regulatory body, the ISO, publishes a standard on making a cup of tea (‘Tea: preparation of liquor for use in sensory tests’, BS ISO 3103:2019). We can buy a copy from the British Standards Institution for ￡138 for five pages. Its previous edition (BS 6008:1980) was awarded the Ig Nobel Literature Prize in 1999 (see New Scientist 17 September 2022).

ESG: unmentionable

The DWP, still keen on ESG, could do worse than buy a new book on human output (Bryn Nelson, Flush: the remarkable science of an unlikely treasure, Hachette, 2022, also reviewed in the New Scientist) which indirectly suggests that investing institutions have a moral obligation to spend more of their resources on sewage, for all sorts of public benefits, and contrary to the views of UK water bodies. There do not yet appear to be any investment guidelines on the topic from TPR but it can only be a matter of time. None of the obvious jokes please.

By-the-by

Regulatory guidance by TPR on diversity yet to be issued but may need revision

A useful issue of the New Scientist contains a letter by Tony Cooke of Gunning, New South Wales, explaining why humans, but not other hairless mammals such as pigs or elephants (he doesn’t discuss marine mammals), have pubic hair (and armpit hair). Obvious when you think about it. It reminds us that there should be a diversity guidance note at some stage in relation to the follicularly challenged. We don’t have figures on the numbers of wholly or partly bald people on pension fund boards, as we don’t for people who are partly sight-disabled (ie wear spectacles), but the chances are they are inadequately represented.

Meanwhile on the same theme, a decision of the Superior Court of the State of California (Robin Crest v Alex Padilla in his official capacity as Secretary of State of the State of California, 13 May 2022) held that the California Senate Bill 826, requiring publicly held corporations with principal executive offices located in California to have a minimum number of women on their boards, paradoxically violated the Equal Protection Clause of the California Constitution. Lawyers, eh?

Super(human) lawyers

Jennifer Walters is a lawyer for the firm Goodman, Lieber, Kurtzberg & Holliway (GLK&H) who specializes in cases involving superhumans. She became a 6-foot-7-inch, powerful, green-hued version of herself, similar to her cousin Bruce Banner, after getting accidentally cross-contaminated with his blood. Her cases are dramatized on Disney+ in the She-Hulk series (see https://www.marvel.com/tv-shows/she-hulk-attorney-at-law/1, pay to watch). Jennifer is in her thirties and single, hardly surprising in the circumstances, but somewhat unfair. No pensions issues as yet for her clients (maybe because they live forever), although hope springs etc. In Australia, of course, pensions lawyers are called superlawyers. As they should be here as well.