UK's PPF consults on £105m fall in 2022/23 levy

The UK's Pension Protection Fund (PPF) has launched a consultation on levy rules for 2022/23, with a strong funding position and stable levy rules resulting in a £105m fall in the levy estimate to £415m.

As reported by our sister publication, Pensions Age, the consultation, which is open until 9 November, revealed that 82 per cent of schemes that pay a risk-based levy are expected to see a reduction, as the PPF's funding position will allow the levy rules to remain stable and the levy methodology to remain unchanged.

The consultation also confirmed that measures introduced in 2021/22 to support schemes amid the pandemic are to remain in place, including the small scheme adjustment, lower cap on the risk-based levy and Covid-19 easement.

The reduction in the levy was attributed to improvements in scheme funding, as well as an update in the way scheme underfunding will be calculated, and employers’ financial resilience in the face of recent economic volatility.

The lifeboat also highlighted its strong financial position throughout the pandemic and defensive investment strategy as being “instrumental” in its decision to allow the levy estimate to fall.

It emphasised that it "bounced back" from the reduced funding level at 31 March 2020, explaining that whilst there are still "significant risks" facing the industry, its strong funding position means it is able to wait to see the level of claims received, rather than increasing levy collection pre-emptively.

PPF general counsel and executive director, David Taylor, commented: “Despite the ongoing risk of employer insolvency, our levy payers’ improved funding positions, together with our financial strength, mean we can avoid raising our levy pre-emptively and maintain stability in our proposed levy rules.

“While we’re pleased to see an overall improvement in scheme funding, we’re mindful of uncertainties around future insolvency rates and the ongoing risk of claims, some of which could individually have a material impact on our reserves.

“It’s therefore vital we continue to collect sufficient levy so we can ensure we can continue to pay our current and future members the compensation they’re entitled to.”

A small number of changes are being made to the levy rules, however, including the bringing together of several levy rules that deal with how schemes without a
conventional covenant are charged and a revision to its approach to overriding scores for companies that have had a restructuring plan or other insolvency-related event.

The PPF confirmed plans for the levy consultation earlier this month at the Pensions Age Autumn Conference, also confirming that the lifeboat is currently in the process of agreeing a loan with the Treasury in order to pay claims on the Fraud Compensation Fund (FCF).

The PPF also previously increased the 2021/22 fraud compensation levy on pension schemes to 75 pence per member, the maximum level allowed under regulations, after a court ruling clarified that occupational pension schemes set up as part of a scam were eligible to claim on the FCF.

    Share Story:

Recent Stories

An overview of growth investing
European Pensions Editor, Natalie Tuck, speaks to American Century Investments (ACI), Vice President, Senior Client Portfolio Manager, Kevin Lewis on growth investing.

They discuss how it has performed in 2021, and its outlook, going forward. They also cover ACI’s differentiated growth approach to the investment universe, and how this capitalises on market inefficiencies, as well as how ACI’s team is equipped to invest in this manner.
Podcast: The benefits of private equity in pension fund portfolios
The outbreak of the Covid-19 pandemic, in which stock markets have seen increased volatility, combined with global low interest rates has led to alternative asset classes rising in popularity. Private equity is one of the top runners in this category, and for good reason.

In this podcast, Munich Private Equity Partners Managing Director, Christopher Bär, chats to European Pensions Editor, Natalie Tuck, about the benefits private equity investments can bring to pension fund portfolios and the best approach to take.

Podcast - The power of three: Using Common Contractual Funds to improve tax outcomes for investors
Large asset owners are still investing in equities in a way where they are taxed on their income. The implication is that they get a poorer return. They need to, and can, improve this, but how?

In this podcast, AMX Head of Client and Manager Development, Aaron Overy, and AMX Product Tax Specialist, Kevin Duggan, discuss with European Pensions Editor, Natalie Tuck, about three options to help ensure good withholding tax outcomes for institutional investors.

Mitigating risk
BNP Paribas Asset Management’s head of pension solutions, Julien Halfon, discusses equity hedging with Laura Blows