PPF confirms zero levy for 2025/26

• PPF decision saves £45m for UK defined benefit (DB) pension schemes
• Benefits nearly 5,000 DB schemes and their sponsoring employers
• Marks significant milestone on PPF’s journey to financial self sufficiency
• Move supports government’s pension reforms and productive investment goals

The Pension Protection Fund (PPF) has today announced that it will not charge a conventional PPF levy this year (2025/26). The move will benefit c.5,000 defined benefit (DB) schemes in the UK, saving them and their sponsoring employers collectively £45m.

When setting this year’s levy rules, the PPF included a provision enabling it to recalculate the conventional levy to zero if appropriate legislative changes were brought forward, and sufficiently progressed, this year.

Since then, the Pension Schemes Bill has been introduced with measures which give the PPF greater flexibility to set the levy. These measures enable the PPF to move to zero levy whilst preserving its ability to reinstate the levy in future if it were ever needed.

The Bill recently passed through Commons Committee stage. The Board, recognising the Bill’s parliamentary progress and the broad support among policy makers and stakeholders for this change, has decided to exercise its provision to move to zero levy for 2025/26. In making this decision at this stage, the Board’s intent was to provide timely clarity for DB schemes and their sponsors, enabling them to better make any associated financial decisions this year.

Moving to a zero levy in 2025/26 marks an important milestone in the PPF’s funding journey. The PPF is in a robust financial position, enabling it to take this decision whilst maintaining strong confidence in its ability to pay current and future members’ benefits.

Minister for Pensions, Torsten Bell said: “Rigid rules currently leave pension schemes paying millions into the Pension Protection Fund even when extra funding is not required. The Pension Schemes Bill will sweep away those constraints. This will support better funded pension schemes and greater investment by firms.”

Kate Jones, PPF Chair, commented: “I’m pleased that we’re able to save DB schemes £45m this year. The legislative changes we’ve needed to further reduce the levy have made good progress, giving us the confidence to act decisively for this year’s levy. As we reach this significant milestone on our journey to financial self-sufficiency, we recognise the invaluable contribution levy payers have made over the past 20 years. We couldn’t have delivered the protection and peace of mind to members without them.”

Michelle Ostermann, PPF CEO, said: “The PPF plays an invaluable role backstopping the entire DB pension system. It's testament to the PPF’s maturity that we’re now in a position to be self-funding. By moving to zero levy, I’m delighted that we’re directly supporting the government’s pension reforms, delivering savings for schemes and enabling more growth supporting investment.“

The PPF will continue to support policy makers as they consider the Bill in its remaining parliamentary stages. The PPF will engage in due course with industry on its levy plans for 2026/27 which will be informed by the remaining passage of the Bill. The PPF continues to prioritise supporting the government’s consideration of PPF indexation levels, work unaffected by the move to zero levy.

The PPF’s decision has been welcomed by stakeholders:

Sir Steve Webb, partner at LCP [and former pensions minister] said: “It is great news that the main PPF levy is to be reduced to zero this year, and is another sign of the transformation of the pensions landscape in recent years. With PPF set to get powers to reinstate the levy if necessary, it is a forward-thinking decision by the Board of the PPF to set a zero levy at the first available opportunity, especially given the robust funding position of the PPF”.

Zoe Alexander, Executive Director of Policy and Advocacy at Pensions UK, said: “The PPF is unquestionably well-managed and well-funded. Meanwhile the defined benefit sector the PPF exists to protect has moved from a deficit to a significant aggregate surplus in recent years while claims on the PPF have been very low. The reduction of the levy to zero is positive news for defined benefit pension funds, their members and their sponsors, and is the culmination of collaborative working and constructive conversations between Pensions UK, its members and the PPF. We acknowledge DWP's contribution for bringing the necessary legislation forward and welcome the timing of this decision, which will provide much-needed certainty for schemes.”

Jon Forsyth, Chair of the DB Committee at the Society of Pension Professionals (SPP), said: “Having worked with the PPF and various stakeholders on this issue over the past 12-18 months, the SPP is naturally pleased that the PPF have today confirmed they will reduce the annual levy from the anticipated £45m to £0. Furthermore, we welcome the fact that the PPF has taken this decision now rather than waiting until the Pension Schemes Bill becomes law. The PPF’s decision means almost 5,000 affected DB pension schemes have certainty. These schemes will no longer have to bear an unnecessary multi-million-pound annual cost and, as we have often said, this money can instead be used to help scheme members, employers and the wider economy.”

Morten Nilsson, CEO, Brightwell said: “This is a landmark moment which will deliver meaningful savings for DB schemes and their sponsors, while maintaining the important safety net the PPF provides to the industry. We welcome the PPF’s pragmatism and proactivity and the government’s commitment to reform through the measures outlined in the Pension Schemes Bill.”

Andy Bord, Railpen CEO commented: “The members and employers of the railways pension schemes have contributed significantly to the PPF levy, so we and our Trustee are delighted they have reached the milestone of financial self-sufficiency, that the protections the PPF brings remain secure, and that the PPF and Government have actively listened to the industry. We encourage all parties to continue to focus on the best interests of members as we build on this important progress.”

Charles Malcolm-Brown, FRSA, Chairman of the SME Pension Consultation Group and member of the PPF’s SME Levy Forum said: “SME Sponsors are mightily relieved by the PPF Board’s decision to suspend the Levy. Our Consultation Group has found the PPF the most transparent and engaging in the pension labyrinth within the confines of primary legislation. This will afford greater leeway to plan and invest in British business during challenging times and as such is warmly welcomed.”

Matthew Percival, Future of Work and Skills Director at the Confederation of British Industry (CBI) said: "With the latest CBI/Pertemps Employment Trends Survey showing that employment costs are now the top threat to labour market competitiveness, the PPF's decision not to charge a levy this year is welcome news for businesses. This has been made possible by the government removing the red tape that forced a levy to be charged even when one wasn't needed.

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