19.04.2024
- Target levy collection for 2024/25 will be £100m, down from £200m in 2023/24.
- 99 per cent of defined benefit schemes expected to pay less levy as a result.
- Levy methodology remains broadly unchanged, as supported by respondents.
- Stakeholders called for legislative change to enable further reductions in levy in future.
- DWP to consider points raised; expect to legislate when parliamentary time allows.
The Pension Protection Fund (PPF) has today announced its final levy rules for 2024/25 and confirmed a 50 per cent reduction in its target levy collection to £100m next year, down from £200m in 2023/24.
Next year’s levy of £100m is the lowest ever level the PPF has charged since it came into operation in 2005. As a result, almost all PPF-eligible defined benefit schemes in the UK are expected to see a further reduction in their levy next year. As supported by respondents to the consultation, and set out in the Policy Statement, the PPF will proceed with minimal changes to its levy methodology for next year.
The PPF’s ability to reduce the levy further is, in effect, constrained by current legislation. When the PPF was set up nearly 20 years ago, legislation sought to protect levy payers from sharp rises in the levy by imposing a limit of 25 per cent on year-on-year increases to the levy target. However, this now effectively constrains how low the levy can fall without damaging the PPF’s ability to respond to a funding challenge should one arise in future.
The majority of respondents to the consultation understood and supported the PPF’s approach, in light of legislative constraints, to maintaining a levy at this level in future years. However, almost all felt strongly that legislation should be changed as soon as possible to allow the PPF to move to a much lower or even a zero levy. The PPF has shared these responses with DWP who will consider the points raised and expect to legislate as soon as parliamentary time allows.
David Taylor, Executive Director and General Counsel, said: “Next year’s target collection of £100m will be the lowest levy we’ve ever charged. As a result, almost all schemes will see a fall in their levy. The possibility of zero levy in future has come closer into sight. To further reduce the levy in future, we need legislative change; I’m grateful that DWP are considering this.”
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 5,200 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 £39 billion of assets under management. It also administers the Fraud Compensation Fund (FCF), the Government’s Financial Assistance Scheme (FAS) and across both the PPF and FAS looks after nearly 440,000 members.
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PPF Press Office
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