The Pension Protection Fund (PPF) has proposed a £100m levy estimate for 2025/26, matching 2024/25, the lowest levy ever set, as it begins a six-week consultation on its future.
The consultation seeks stakeholder feedback on the levy estimate and recommended approach to tax collection. According to the PPF, keeping the charge at this level, which represents less than 0.007 per cent of total DB scheme assets, is consistent with the approach proposed last year.
The Society of Pension Professionals (SPP) has called for a PPF levy reform that would provide the PPF the flexibility to lower the charge to zero despite legislation capping annual increases at 25 per cent. In 2022, PPF stated in its three-year strategy plan that it intended to cut the fee, possibly through legislative reforms.
The PPF levy is paid by all eligible schemes to help in protecting DB pension scheme members in the event that the sponsoring business becomes insolvent.
PPF executive director and general counsel David Taylor says: “We’re proposing to charge a levy of £100 million, as we did for 2024/25 – this is our lowest ever levy. Meanwhile, we will continue to engage with the Government on legislative changes to enable us to reduce the levy further and even to zero. We will keep progress on this under review and not charge for longer than we need.
“The proposed changes to our methodology will help to maintain the pool of risk-based levy payers, thereby spreading the levy more reasonably. More than half of those who pay a risk-based levy will see it decrease and there will be a marginal impact on those schemes who will see an increase.
“We’ve also acted on valuable stakeholder feedback to make it simpler for schemes to certify deficit reduction payments. I encourage stakeholders to respond and we look forward to hearing views on our proposals.”
SPP DB committee chair Chris Ramsey says: “The SPP is pleased to see the PPF are consulting on the future of the levy and will certainly be responding.
“We know that the levy has reduced substantially over the past few years, but it still stands at over £100m a year and a multi-billion-pound surplus has accrued.
“We believe that there is a strong argument for the PPF to further reduce the levy, potentially to zero. Unfortunately, the PPF is reluctant to do this as existing legislation prevents any annual increase beyond 25 per cent, which might be needed if the PPF’s finances were to deteriorate.
“Given the Government has already confirmed its intention to pass a Pension Bill next Spring, it would make sense for this restriction on the levy to be lifted in that legislation. This would enable a more sensible levy policy going forward, that doesn’t result in such an unnecessary collection of pension scheme money.”