- £100 million levy estimate for 2024/25, down from £200m in 2023/24 and £390m in 2022/23.
- The levy PPF aims to collect has been reduced by almost 85 per cent since 2020/21 without risking the long-term security of current or future members.
- Almost all levy payers are expected to see their levy fall compared to the current year.
- Consultation launched on the 2024/25 levy rules.
The Pension Protection Fund (PPF) has today announced in its 2024/25 levy consultation that it expects to collect £100m in levy next year, further reducing the levy by half compared with the 2023/24 estimate.
The seven-week consultation is seeking stakeholders’ views on the proposed levy estimate and PPF’s approach to future levy collection. As the PPF’s latest Annual Report and Accounts highlights the PPF is in a strong financial position and its funding position has improved over the year. Consistent with its funding strategy outcomes published in Autumn 2022, the PPF is continuing the process of transitioning to a lower levy.
Oliver Morley, CEO, said: “We were pleased to report another successful financial year in our Annual Report, and this has now been reflected in our proposal to further reduce the levy by half, taking the levy estimate down from £200 million in 2023/24 to £100 million for 2024/25.”
Although the risks to the PPF are currently lower, particularly as scheme funding has strengthened, the consultation explains that the PPF’s governing legislation makes it necessary to continue to collect a levy to mitigate against any unexpected funding challenge. There are legal limits on the extent to which the levy can be increased from year to year (a maximum increase of 25 per cent), effectively preventing the PPF reducing the levy further.
Mr Morley added: “The current legislation was intended to protect levy payers from sharp increases in the levy; however, it also effectively constrains how low we can allow the levy to fall without damaging our ability to respond to a funding challenge should one arise. We therefore plan to ensure the levy remains at or above £100 million in future years.”
The consultation indicates that a small increase in the levy scaling factor is needed to achieve a levy of £100 million in 2024/25, but the PPF expects 99 per cent of levy payers to see their levy fall compared to the current year. The PPF anticipates that more substantial changes are likely to be necessary to maintain a levy of £100 million in future years, if there is not to be an increasing burden on a declining group of schemes that continue to pay a risk-based levy. This consultation, closing on 30th October 2023, seeks views on the proposals for 2024/25 but also on the options to distribute a £100m levy between schemes in future years.
Notes to editors
About the PPF
The Pension Protection Fund (PPF) is a public corporation, set up by the Pensions Act 2004, and has been protecting members of eligible defined benefit (DB) pension schemes across the UK since 2005. The PPF is run by an independent Board and accountable to Parliament through the Secretary of State for the Department for Work and Pensions. It protects close to 10 million members belonging to more than 5,100 pension schemes. If an employer collapses and its DB pension scheme cannot pay members what they were promised, the PPF pays compensation for their lost pensions. The PPF is funded by a levy charged to eligible schemes, the return on its investments, assets from pension schemes transferred into the PPF and recoveries from insolvent employers.
The PPF is one of the UK’s largest asset owners with £32.5 billion of assets under management. It also administers the Fraud Compensation Fund (FCF) and the Government’s Financial Assistance Scheme (FAS), and across both the PPF and FAS looks after nearly 440,000 members.