Time to amend ‘ludicrous’ PPF levy legislation – Steve Webb, LCP

Reacting to today’s publication of a consultation on next year’s Pension Protection Fund levy, LCP Partner Steve Webb has called for a change in the law to end what he describes as the ‘ludicrous’ situation in which the PPF finds itself. 

This year, the PPF levy was set to raise £100m, and today’s consultation proposes that the levy should raise a similar amount.   

However, PPF says that their finances are so robust that they do not actually need to raise a levy at all. The root of the problem is legislation that says that in the future if PPF finances were to deteriorate, they could only increase the levy by a maximum of 25% from one year to the next. Perversely, if PPF were to abolish the levy when it wasn’t need it, they would be unable to bring it back because 25% of zero is zero. A simple change to legislation – perhaps rewriting the rules so that PPF could reinstate a levy if needed – would allow them to save employers £100m next year, confident in the knowledge that this would not cause problems in future if things deteriorated.

Steve Webb said:

“The PPF levy has been cut substantially in recent years as the organisation’s financial position has improved. But now we have reached the ludicrous situation, driven by inflexible legislation, where PPF would like to cut the levy further but feels it would be irresponsible to do so.  A simple change to the law would allow the PPF to scrap its £100m levy for next year, confident that if things deteriorated sharply, it could always be reintroduced. With a Pensions Bill set to go through Parliament in the current session, it would be straightforward for the government to amend the law so that the levy could be further cut next year without undermining the financial stability of the PPF.”