Yes, at our school the children have to be a solid Level 3 in Y2 to get a 3 awarded, but then on entry into Y3, they are all assumed to be 3c, simply because Level 3 at KS2 covers different things (and more things) than L3 at KS1. This is also to do with the value-add score.
I've also been told that, in our school, the Y3 teachers are not supposed to give L4s any more (perhaps they do in exceptional circumstances), because they found they had a problem with showing value-add if the children make too much progress early on. If they are already at a 4 in Y3, they can't demonstrate adequate progress even if they get a high 5 in Y6 - they've still not progressed enough sub-levels. I have just had precisely this discussion with two Y3 teachers, because they've changed their reporting guidelines since DS1 was in Y3. They also used to report sub-levels in Y3, but have decided not to do so any more.
But this really does show that you can't compare performance between schools, as different rating systems may be used.
I know Seeker's example was within her own school. There is a lot of consolidation in Y3 and DS1, who only went up one sub-level from 2a to 3c in Y3, progressed massively the next year and is one of the strongest in his year in maths now. So tell 'em all not to worry.