PLSA supports pause on PPF levy decision to allow time for necessary reform | Pensions and Lifetime Savings Association
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PLSA supports pause on PPF levy decision to allow time for necessary reform

PLSA supports pause on PPF levy decision to allow time for necessary reform

12 December 2024, Press Release

The PLSA welcomes the Pension Protection Fund’s decision to delay setting the level of levy it collects from defined benefit pension funds.

Under the current legislative framework, annual increases to the levy are capped at 25%. Consequently, the PPF had proposed imposing a levy of £100m on defined benefit pensions to allow for future increases should scheme funding strength deteriorate or future insolvencies necessitate higher claims.

However, the PLSA has argued that the proposed levy represents an unnecessary high cost on pension funds and called for it to be reduced to zero.

With more than £13bn in surplus, the PPF’s ability to withstand claims is strong, reflecting the success of PPF management. Meanwhile, claims remain low (just 14 claims totalling £13.5m were paid in 2022/23) and DB scheme funding levels are at record highs.

The pause represents a pragmatic step to allow more time for the Government to commit to reforming the legislation and give the PPF the confidence to reduce the levy, ultimately to zero, knowing that it could, in extremis, raise the level of the levy again should there be higher claims in the future.

Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association (PLSA) said: “It is very positive the PPF has decided to hold back its decision to set the levy defined benefit pension schemes pay to support its operation. 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.

“The move keeps open the possibility of the PPF reducing the levy ultimately to zero, provided the DWP can swiftly commit to reforming legislation, as part of the Pension Schemes Bill, to allow the PPF to raise more levy should there be higher claims on it in the future. We also support PPF’s dialogue with DWP on further government consideration of PPF and FAS indexation rules.”

Mark Smith, Head of Media Relations
020 7601 1726 | [email protected]

Cali Sullivan, Senior PR Manager
020 7601 1761 | [email protected]