Pensions Bulletin 2025/05

PPF reduces total levy collection to £45m

The Pension Protection Fund confirmed on 30 January 2025 that it had set the estimated total levy intake for 2025/26 to be £45m, less than half of its original proposal of £100m in September 2024 (see Pensions Bulletin 2024/35). It further made provision to allow it to invoice a zero levy for 2025/26 if legislation is brought forward, and sufficiently progressed to enable the PPF to bring back levy charges in the future if needed.  

To achieve the £45m estimated levy intake, the PPF has rolled back some of its proposed changes, and the main confirmed rules for 2025/26 are as follows:  

• The Levy Scaling Factor will be 0.40, unchanged from 2024/25 (reversing the proposed reduction to 0.35); 
• To keep the proportion of the levy that is Scheme-based at the legislative maximum of 20%, the Scheme-based Levy Multiplier will be 0.000009, reduced from 0.000015 in 2024/25 (not taking forward the proposed increase to 0.000018). 
• The asset and liability stress factors are updated to allow for market data up to 31 December 2023 (the proposed increase in stresses will now not take place). 
• The section179 liability valuation assumptions used to roll forward such valuations to 31 March 2025 are updated from version A10 to version A11 (as proposed). 

Following feedback to its consultation and support from the Government, the PPF has also introduced a provision within the rules that will effectively allow it to set the 2025/26 levy to zero if, by 31 March 2026, legislation is amended or there is a clear commitment by the Government to amend legislation, so that the year-on-year restriction to increase the levy by no more than 25% is removed. This new provision sets an alternative Levy Scaling Factor and Scheme-based Levy Multiplier, both of which will be set to nil in this eventuality in order to deliver a zero levy.  

The PPF has said it is prepared to be flexible regarding the timing of invoicing for the 2025/26 levy to give as much time as it can for changes in legislation to become clear, which would enable it to use these alternative provisions. The PPF will provide an update on its expectations for invoicing by the end of September 2025.  

If these alternative zero levy provisions are not used for 2025/26 then the PPF expects that, of the schemes that pay a risk-based levy, almost 99% will see a reduction in their risk-based levy compared to 2024/25 as a result of the final rules. Where a scheme does see an increase it will generally be because of an increase in either underfunding or insolvency risk. Overall, the PPF expects that 99.7% of schemes will see a reduction in total levy, with an average decrease of around 55%.  

In addition to the above changes the PPF has also confirmed that changes have been made to simplify the approach to certifying deficit reduction contributions, update the mapping of credit ratings to levy bands, and update its separate methodology and guidance for alternative covenant schemes, as proposed in September. Following consultation, the PPF has decided to extend the criteria on special category employers to include “public non-financial corporations” and “public financial corporations” as classified by the Office for National Statistics. 

The PPF has also updated its online guidance and levy waiver application form to make it clearer that it is open to considering waiver applications from schemes that have full insurance buy-ins. It has highlighted that it may need to consider specific elements of a scheme’s waiver application on a case-by-case basis and encourages schemes to contact them to discuss their particular circumstances.

MPs look to progress a compensation scheme for 1950s born women affected by State Pension Age changes 

A Private Member’s Bill, introduced by SNP MP Stephen Flynn, appears to be taking over from where a previous Bill of the same name was lost when Parliament was dissolved for the 2024 General Election. 

The Women's State Pension Age (Ombudsman Report and Compensation Scheme) Bill had its First Reading on 28 January 2025 and although it has yet to be published, it may well be very similar, if not identical, to the previous Bill (see Pensions Bulletin 2024/17).  Second Reading is scheduled for 7 March 2025. 

As before, the Bill requires the Secretary of State to publish measures to address the findings of the Parliamentary and Health Service Ombudsman in its report “Women’s State Pension age: our findings on injustice and associated issues”; to require the Secretary of State to publish proposals for a compensation scheme for women born between 6 April 1950 and 5 April 1960 inclusive who have been affected by increases in the state pension age; and for connected purposes. 

On 28 January 2025 the Bill attracted 105 supporters, drawn predominantly from the Liberal Democrats, but with backing from MPs across pretty much the entire spectrum within Parliament including 10 Labour MPs.   

PPF levy ceiling increases once more

The overall pension protection levy “ceiling” for 2025/26 will be just over £1.4bn – the precise amount being set out in the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) Order 2025 (SI 2025/103) made by the DWP on 30 January 2025. 

This is a 4% increase on the 2024/25 ceiling due to the increase in average weekly earnings in the year to 31 July 2024. 

The actual maximum levy the PPF can take in 2025/26 is further constrained by other rules and is substantially less than the £1.4 billion permitted by this particular Order.  The PPF is intending to raise £45m in 2025/26 and possibly not even that (see article above).