PPF’s zero levy for 2026-27 welcomed by industry
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The Pension Protection Fund has confirmed that will not charge a PPF levy next year, while it said a proportionate risk-based ‘alternative covenant schemes’ levy will be maintained. The PPF will publish its Policy Statement and final rules for the 2026-27 levy next month.
About 5,000 conventional defined benefit schemes with about £1tn in liabilities protected by the PPF will not have to pay a levy in 2026-27. This is the second time in a row that the lifeboat fund has waived the levy, ahead of legislation being passed that will give it the legal right to do so. The decision not to demand the levy comes as the PPF runs a £14bn reserve and as most schemes are currently well funded.
Chief executive Michelle Ostermann said: “This is an important time for pensions. Not charging a levy to conventional schemes in 2026-27 reflects the evolution of risk in this sector and will reduce costs for DB schemes and employers. We’re grateful to all those who responded to our recent consultation, and more broadly for the ongoing dialogue and productive engagement with our members and levy payers throughout our 20-year history.”
The PPF has confirmed it will “maintain a proportionate ACS levy” next year, citing the superfunds sector. It said it is committed to working closely with stakeholders to review the ACS levy methodology for 2027-28 to ensure it continues to be proportionate.
Jon Forsyth, who chairs the Society of Pension Professionals' DB Committee, said the announcement is welcome news.
About 5,000 conventional defined benefit schemes with about £1tn in liabilities protected by the PPF will not have to pay a levy in 2026-27. This is the second time in a row that the lifeboat fund has waived the levy, ahead of legislation being passed that will give it the legal right to do so. The decision not to demand the levy comes as the PPF runs a £14bn reserve and as most schemes are currently well funded.
Chief executive Michelle Ostermann said: “This is an important time for pensions. Not charging a levy to conventional schemes in 2026-27 reflects the evolution of risk in this sector and will reduce costs for DB schemes and employers. We’re grateful to all those who responded to our recent consultation, and more broadly for the ongoing dialogue and productive engagement with our members and levy payers throughout our 20-year history.”
The PPF has confirmed it will “maintain a proportionate ACS levy” next year, citing the superfunds sector. It said it is committed to working closely with stakeholders to review the ACS levy methodology for 2027-28 to ensure it continues to be proportionate.
Jon Forsyth, who chairs the Society of Pension Professionals' DB Committee, said the announcement is welcome news.
“The SPP has long recommended that the PPF be granted the flexibility to have a zero levy; has worked with PPF and [Department for Work and Pensions] to help achieve this; and reiterated this support when we responded to the PPF consultation on the same last month.”
The PPF has so far been bound by legislation that put a percentage limit on how much it can raise the levy by, which previously made zero levy impossible. Industry lobbying has resulted in a change of legislation, with the PPF making use of this ahead of it coming into force.
Zoe Alexander, executive director of policy and advocacy at Pensions UK,said the confirmation of a zero levy provides welcome clarity and reporting relief to schemes.
“Prudent investment management and falling interest rates have combined to mean the vast majority of DB funds are now in a healthy surplus, posing a significantly reduced risk of having to rely on the PPF. The PPF is, in turn, unquestionably well capitalised,” Alexander said.
Some have gone further and asked if there should not be a refund of the PPF’s reserve.
“Clearly the PPF’s primary role is long-term security, not redistribution. But as the risk landscape shifts, should the levy framework evolve with it?” said Andy Smith, principal at consultancy Barnett Waddingham.
“Prudent investment management and falling interest rates have combined to mean the vast majority of DB funds are now in a healthy surplus, posing a significantly reduced risk of having to rely on the PPF. The PPF is, in turn, unquestionably well capitalised,” Alexander said.
Some have gone further and asked if there should not be a refund of the PPF’s reserve.
“Clearly the PPF’s primary role is long-term security, not redistribution. But as the risk landscape shifts, should the levy framework evolve with it?” said Andy Smith, principal at consultancy Barnett Waddingham.
He suggested the possibility of refunds could potentially change trustee behaviour or make run-on more attractive to employers, and be used as a policy lever for government, “for example, linking refunds to long-term UK or productive finance investment”.
Different groups have been eyeing the PPF’s reserves, including pensioners, whose lobbying resulted in the government agreeing to pre-1997 inflation increases being given to PPF and Financial Assistance Scheme members where their schemes had promised these, with a cap of 2.5%.
