Industry is hopeful as PPF pauses £100m levy decision
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The Pension Protection Fund’s board will wait until January to come to a definitive decision about the levy for 2025-26 while it engages with the government over greater flexibility in setting the levy. Industry commentators suggest a legislative change could be included in the pension schemes bill that was announced for next year.
The levy was proposed at £100m in the autumn, but the pensions industry has criticised this, considering the PPF’s £13bn reserve and currently low claim levels thanks to good funding in the defined benefit universe.
Many therefore wanted to see a zero levy instead. However, by law the PPF cannot currently increase the levy by more than 25% in one year. Putting the levy lower might mean it could not be raised fast enough should there be a scheme funding crisis in future, while reducing it to zero would rob the lifeboat of the ability to ever reintroduce it, since any percentage of zero is still zero.
A decision about the levy has now been postponed while the PPF works with the Department for Work and Pensions on additional flexibility. The decision will be published by the end of January.
PPF chair Kate Jones said: “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.”
The levy was proposed at £100m in the autumn, but the pensions industry has criticised this, considering the PPF’s £13bn reserve and currently low claim levels thanks to good funding in the defined benefit universe.
Many therefore wanted to see a zero levy instead. However, by law the PPF cannot currently increase the levy by more than 25% in one year. Putting the levy lower might mean it could not be raised fast enough should there be a scheme funding crisis in future, while reducing it to zero would rob the lifeboat of the ability to ever reintroduce it, since any percentage of zero is still zero.
A decision about the levy has now been postponed while the PPF works with the Department for Work and Pensions on additional flexibility. The decision will be published by the end of January.
PPF chair Kate Jones said: “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.”
Industry wants zero levy
The pensions industry is keen to see the levy reduced further. Chris Ramsey, who chairs the Society of Pension Professionals’ DB committee, said that “the annual levy is money that the PPF readily admits it does not need because of its multi-billion-pound surplus”.
If a legislative change can be included in the 2025 pension schemes bill, the £100m could be used to help members, employers and the wider economy, he argued.
Similarly, the Pensions and Lifetime Savings Association also wants the levy to be reduced to zero. It called the delay in setting it “a pragmatic step” to allow the government time to commit to reform.
“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,” said Zoe Alexander, director of policy and advocacy.
Hymans Robertson’s head of pensions policy innovation Calum Cooper also pointed out that the government is asking businesses and pension funds to pay more national insurance and invest in UK productive finance.
"With a £12bn+ surplus, paying £100m when it’s not needed is what productive finance is not,” he said.
“My wish is that the DWP can help give the PPF the confidence they need to reach a safe and sensible place on the future levy. It's in everyone's interests and would be a great win for government - one which is within their gift.”
