The Government is considering permitting the Pension Protection Fund (PPF) to reduce the levy it collects from pension schemes in order to help drive economic growth.
- The Government is considering proposals to allow the Pension Protection Fund greater flexibility to reduce the levy it collects from pension schemes by relaxing restrictions.
- Changes will unlock millions of pounds for schemes, enabling employers to invest in their businesses and grow the economy.
Under current rules, the PPF has limitations on changing the levy it collects from schemes despite the PPF being in a strong financial position, following years of high levels of levy collected creating a secure cushion for DB pension funds.
Growth is at heart of the Government's Plan for Change and removing this restriction will boost the amount of money schemes have to invest and for employers to grow their business, as they would be paying less each year to the PPF.
This comes on top of planned reforms announced by the Chancellor this week at a roundtable with leading UK businesses to unlock billions in surplus from defined benefit pension schemes.
Minister for Pensions Torsten Bell said:
The Pension Protection Fund is an important safety net for many pension savers. It is also one in a strong financial position, so it is time to change outdated rules that would force the PPF to levy pension schemes unnecessarily. This will free up funds that allow pension schemes or employers to invest, supporting savers and growth.
This proposal, in addition to our plans to unlock billions of surplus from defined benefit pensions schemes, shows we are laser focused on making the long term changes that will grow our economy.
Kate Jones, PPF Chair added :
We warmly welcome the government's intent to give us the flexibility to reduce the levy. We ultimately don't want to charge levy payers any more than we need to.
On the back of this positive announcement we will now introduce further reductions and, in doing so, support sponsoring UK businesses and the government's growth plans.
Additional Information
The Board of Pension Protection Fund collects a levy from eligible defined benefit occupational pension schemes. Legislative restrictions prevent the PPF from raising the levy beyond 25 per cent of what it collected the previous financial year.
In response to calls for the levy to be reduced further, the Department for Work and Pensions and the Pension Protection Fund are working together to consider what further flexibility can be given to the Board of the Pension Protection Fund to adjust the levy by removing the restriction in legislation. Changes to the levy will require primary legislation.
The Pension Protection Fund is funded by transferred scheme assets, investment returns, a levy paid by eligible defined benefit pension schemes and recoveries from employers.
As of 31 March 2024, the Pension Protection Fund had reserves of more than £13.2bn, actuarial liabilities of £18.8bn and £32.1bn in assets under management.
Any changes to the pension protection levy will balance the interests of levy payers and members.
