12.12.2024
The Pension Protection Fund (PPF) has today welcomed the announcement by the Department for Work and Pensions (DWP) that the government will consider giving the PPF more flexibility to reduce its levy, thus supporting DB schemes and their sponsoring employers to drive growth.
Kate Jones, PPF Chair, said: “We warmly welcome the government’s intent to give us greater flexibility to reduce the levy. Levy payers have long made a vital contribution to the PPF’s funding. We ultimately don’t want to charge levy payers any more than we need. This positive announcement is an important step towards that end goal.”
Since its last update in December, the PPF has worked closely with colleagues in government. This has informed the PPF’s approach to finalising its plans for the 2025/26 levy.
The PPF Board has acted to more than halve its levy estimate for 2025/26 to £45m. This is a significant reduction on the £100m estimate initially proposed and would be its lowest ever levy. Almost all schemes – 99.7 per cent – would be expected to see a reduction in levy next year.
In addition, the PPF has included a new provision in its levy rules that would enable the Board to calculate a zero levy if appropriate changes that would give the PPF greater flexibility in setting the levy are brought forward, and sufficiently progressed, in the course of 2025/26.
Kate Jones, PPF Chair, commented: “On the back of our positive engagement with government, and based on our current risks, we’ve moved to reduce costs for levy payers and support sponsoring businesses. Importantly, we’ve also ensured we have the flexibility to review our approach if sufficient progress can be made on the changes we need.”
The PPF recognises the vital importance of balancing both levy payer and member interests.
Kate Jones added: “In addition to changes on levy, we’d welcome further government consideration of PPF and FAS indexation rules. We will continue to work constructively with DWP in the interests of all our stakeholders.”
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Notes to editors
Background on the case for legislative change
- The PPF’s founding legislation – the Pensions Act 2004 – places a legal limit of 25 per cent on the extent to which the levy can be increased from year to year.
- This was intended at the time to protect levy payers from sharp increases in the levy.
- However, it now effectively constrains the PPF’s ability to reestablish a material levy in a reasonable timeframe should a funding crisis arise.
- As it stands, legislative constraints mean if the PPF reduced the levy to zero it couldn’t start it again and, the lower the levy falls, the longer it would take to raise it to a material level.
- The PPF has, since 2022, signalled that legislative changes are needed to provide it with greater flexibility on setting levy.
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 is accountable to Parliament through the Secretary of State for the Department for Work and Pensions. It protects close to 9 million members belonging to around 5,000 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 £32.1 billion of assets under management. Separate and additionally to the PPF, it also administers the Fraud Compensation Fund (FCF) and the Government’s Financial Assistance Scheme (FAS). The PPF looks after over 430,000 members across the PPF and FAS.
For further press information contact:
PPF Press Office
020 8406 2107
