PPF confirms significant reduction in levy following widespread support for consultation proposals on rules for 2023/24
Almost all schemes expected to pay less levy next year
- £200 million levy estimate for 2023/24, down from £390m in 2022/23.
- 98% of schemes expected to pay less levy in 2023/24 than this year
- The majority of schemes that pay a risk-based levy can expect it to fall by more than half
- Proposals to significantly reduce volatility in levies and to incorporate new asset class information will go ahead as planned.
- Recent market movements will not impact funding strategy or proposed asset stresses which take a long-term view of risk and are not guided by short term volatility.
The Pension Protection Fund (PPF) has today announced its final levy rules for 2023/24, almost halving the levy estimate for next year, which is expected to result in almost all schemes paying less levy.
As set out in PPF’s policy statement, levy payers and industry experts welcomed proposals for changes which will cut the levy to around £200 million for 2023/24, down from £620m in 2020/21 and £390m for this current year.
PPF confirmed they will go ahead with proposals to reduce the increments between levy bands to significantly reduce volatility in levies, and to cut the risk-based levy scaling factor by 23 per cent and the scheme-based levy multiplier by 10 per cent. The consultation also contained proposals to integrate into the levy the new asset class information being collected by TPR in 2023. All these proposals were strongly supported by stakeholders who submitted responses and attended events during the six-week consultation, which closed on 10th November.
Oliver Morley, Chief Executive, said: “We are pleased to announce that next year’s Levy will be reduced by almost half. The industry has told us our proposals are sensible and welcome at a time when there are many financial pressures on employers. It is excellent news that as a result of our strong financial position, and the current level of perceived risk posed to the PPF, we can actively reduce the levy while still ensuring a positive and secure outcome for our current and future members.
“We are very grateful for the feedback on our proposals for next year’s Levy Rules and the helpful insights which will continue to inform the development of future levy methodology.”
The PPF's consultation also sought views on priorities for developing the levy methodology in the longer term, on the basis the PPF expects the levy to substantially reduce over time. The majority of respondents were supportive of the proposed direction of travel and provided a range of comments that will inform the PPF’s future approach. In response, the policy statement emphasises that the PPF remains committed to ensuring the risk-based levy is risk-reflective, so that schemes with weaker sponsors continue to pay more per pound of underfunding.
Consultation responses also highlighted an interest in the use of potential excess reserves in the future. While this is an issue for Government, the PPF recognises that there are a variety of stakeholder views on this and will share them with Government.
Notes to Editors
The PPF will continue to develop thinking on the long term future of the levy. A new page has been added to the PPF website that will be used to update stakeholders on the latest position and seek their views.
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.
For further press information contact:
PPF Press Office
020 8406 2107