Future of the Levy

Reducing the PPF levy

As a result of our strong financial position and the continued improvement in scheme funding, the risks we face have reduced over time. This in turn means we are less reliant on the levy than we used to be, enabling us to reduce the total amount we collect in levy whilst continuing to provide good protection for our members’ benefits.  

However, we must also be able to adjust the levy to respond to funding challenges if necessary. In our September 2023 and September 2024 consultations, we gave details about our ambition to move to a much lower or even a zero levy, only reintroducing the levy in the event of a significant challenge to its funding position. 

However, the Pensions Act 2004 sets limits on how much we can charge and how much we can alter the total from year to year. In particular:

• The amount we can increase the levy estimate from year to year is limited to 25 per cent. This would prevent us charging a levy again if we ever set a levy estimate of zero and constrains the speed the levy can be raised if reduced to a low level. 

• The proportion of the levy estimate raised by the scheme-based levy (charged based on scheme size) is limited to 20 per cent. 

As we set-out in our Policy Statement for the 2025/26 rules, we continue to work closely and constructively with Government on the case for legislative change. As part of this we have shared consultation feedback with DWP officials, and we also know that stakeholders have shared their views directly with Government. While future legislation is a matter for government, the positive nature of the PPF’s recent engagement has helped inform our approach.

As such, we have included a provision with our levy rules for 2025/26 that would enable the Board to set a zero levy if appropriate levy legislative change is brought forward and sufficiently progressed over the course of 2025/26. 

Changing the future levy system 

We sought to gain further input from stakeholders on possible areas for simplification in our September 2023 levy consultation. Some respondents expressed caution about major change and the potential for transitional costs. As there is chance that levy might only be needed to be charged for a limited time, we will aim to avoid changes that cause significant upheaval.

Rather our focus is on measures that could reduce the burden on schemes. Respondents provided suggestions on the scope of simplifying some rules and processes. This feedback has informed our approach for the 2025/26 rules.

Next steps

We will continue to update this page as our work on the Future of the Levy progresses, and invite anyone who would like to share their views to email [email protected].