‘Very positive step’ to reform PPF levy – Steve Webb, LCP
Pensions & benefits DB pensions
Today’s announcement by pensions minister Torsten Bell that PPF will be given new flexibility to reduce their levy has been warmly welcomed by LCP Partner Steve Webb, who has long argued for reform.
Under current rules there is a cap on the annual increase in the PPF levy of 25%. What this means in practice is that if the PPF concluded that it didn’t currently need the levy, it would be risky to set bills to zero because the levy could never be brought back in future if circumstances changed. This can lead to the absurd situation where PPF has to charge a levy which it does not think it needs.
Following the Minister’s announcement, the forthcoming Pension Schemes Bill will be used to relax the rules so that PPF can cut the levy – below the £100m previously planned for 2025/26 – with the confidence that it can reinstate the levy at a future date if it should prove necessary.
This is a very welcome announcement which will reduce costs for pension scheme sponsors without undermining the financial position of the PPF. We had reached an absurd situation where PPF had to continue with a levy that it did not need, simply to protect its future options. Provided that this change goes through, we can expect to see levy bills fall, which will be a welcome boost to companies who sponsor DB schemes.
Steve Webb LCP Partner
