it is apparently all related to what they were assessed at at the end of reception.
"Normal" is expected to improve 2 levels about that by the end of year 2, and then 2 more levels by the end of year 6. Each level is subdivided into a, b and c. In years 3-6 they are expected to go up 2 sub levels a year - so 3c to 3a or 3b to 4c in one year.
So if he gets a 2b at the end of year 2, he would be expected to get 4b at end of year 6.
Level 4 is average, level 5 is above average.
So level 3 is normal for year 3 (3c or 3b) and but also for year 4 (3a).
Schools are judged on the number getting level 4 and level 5 at end of year 6. Those getting level 5 are better than expected, those getting less than 4 are worse than expected (for normal kids - those with special needs are more likely to get less than level 4).
Schools are supposed to use these grades to track that kids are doing as well as should be expected, and if not, to put in intervention where it is needed to lift them up to their expected level.
(this as explained to us by our head at a governors meeting 2 days ago. If I understood it correctly ).