UK defined benefit pension backstop The Pension Protection Fund has proposed a £100m levy estimate for 2025/26, the same as in 2024/25, equalling the lowest levy ever.
Concurrently, the organisation announced a six-week consultation that seeks stakeholders’ views on the levy estimate and proposed approach to levy collection. The PPF says that maintaining the levy at this level – equivalent to less than 0.007 per cent of total DB scheme assets – is consistent with the approach consulted on last year.
“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,” said David Taylor, Executive Director and General Counsel at the PPF.
Stakeholder feedback last year underscored the importance of, firstly, ensuring the risk-based levy continues to be paid by a broad range of levy payers – rather than allowing the levy to become concentrated on a smaller group; and secondly, ensuring that the levy continues to be distributed in the most risk-reflective way possible.
The proposed changes will alter the distribution of the levy but the impacts will be limited. The PPF expects schemes will pay broadly the same scheme-based levy as in 2024/25 and, of the c.37 per cent of schemes that pay the risk-based levy, most (63 per cent) would see a decrease whilst only 5 per cent would see an increase of more than 0.01 per cent of liabilities. By comparison with 2023/24 (when the levy was £200m overall), 95 per cent of schemes will pay a lower levy in 2025/26.
“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,” added Taylor.
