Following a consultation on keeping its levy at £100m (€121m), the Pension Protection Fund (PPF) is placing its decision on hold on the matter until January as it had “positive engagement” with stakeholders.
The lifeboat said legislative change is needed to provide the PPF with greater flexibility and ultimately enable it to set a zero levy. Pending legislative change, the PPF consulted this autumn on maintaining the levy at £100m next year.
Last month, WTW claimed that the PPF could lower the levy further, and that it should be no greater than £60m – considering that more than 80% of pension schemes were in aggregate surplus of nearly £360bn in 2023 and the PPF’s own £13bn surplus and 166% funding level.
Following the consultation, the PPF said the board has been carefully considering all options, including reducing the levy further before any legislative change. As part of this, the PPF has been working closely with the Department of Work & Pensions (DWP).
Kate Jones, PPF chair, said: “The board is grateful to those who responded to our consultation and for the chance to openly engage with other key stakeholders. We need to balance the needs of all our stakeholders with our financial responsibilities and have been actively considering a wide range of options. To allow more time for this work, including engagement with colleagues at DWP, the board will conclude its decision on next year’s levy in January.”
She said: “Ultimately, we don’t want to charge the levy for any longer than is needed and are working towards this goal.”
The PPF will now look to finalise and publish its levy determination and rules for 2025/26 by the end of January.
Placing the decision on hold until January was welcomed by the pensions industry.
Zoe Alexander, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), said: “It is very positive the PPF has decided to hold back its decision to set the levy that defined benefit (DB) pension schemes pay to support its operation. This is at a time when pension funds are being asked to increase investment in productive assets and sponsoring employers are facing higher costs due to the increase in employer national insurance contributions.”
She said the move keeps open the possibility of the PPF reducing the levy ultimately to zero, provided the DWP can swiftly commit to reforming legislation, as part of the Pension Schemes Bill, to allow the PPF to raise more levy should there be higher claims on it in the future.
She said: “We also support PPF’s dialogue with DWP on further government consideration of PPF and FAS indexation rules.”
Chris Ramsey, chair of the Society of Pension Professionals’ defined benefit committee, said the “annual levy is money that the PPF readily admits it does not need because of its multi-billion-pound surplus”.
He added that if a legislative change can be secured in the 2025 Pensions Bill, this would mean pension schemes would no longer have to bear an unnecessary £100m annual cost, and this money could instead be used to help members, employers and the wider economy.
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