The Pension Protection Fund (PPF) has confirmed it will set a zero levy for the next year (2026-27) for the 5,000 conventional defined benefit (DB) schemes it protects.
The decision marks the second consecutive year that conventional pension funds will not be charged a PPF levy.
The decision follows a consultation where PPF expressed its intent to set a zero levy for conventional DB schemes, dependent on the progress of the levy measures contained in the Pension Schemes Bill.
The PPF now said it is “reassured” by the consideration given to the changes needed to conclude its decision-making following the government’s introduction of amendments to the Pension Schemes Bill, which will abolish the administration levy and enable the PPF to cover all its operating costs from its core.
While the conventional levy will be set at zero, the PPF confirmed it will maintain a “proportionate” alternative covenant pension fund levy next year as the framework for superfund is evolving as part of the Pension Schemes Bill, and the sector has potential for “significant growth”.
The PPF is expected to publish its Policy Statement and final rules for the 2026/27 levy next month.
Michelle Ostermann, chief executive officer at PPF, said: “This is an important time for pensions. Not charging a levy to conventional schemes in 2026/27 reflects the evolution of risk in this sector and will reduce costs for DB schemes and employers.”
She added: “We’re grateful to all those who responded to our recent consultation, and more broadly for the ongoing dialogue and productive engagement with our members and levy payers throughout our 20-year history.”
Zoe Alexander, executive director of policy and advocacy at Pensions UK, welcomed the PPF’s move to set the levy to zero for the second consecutive year.
“Prudent investment management and falling interest rates have combined to mean the vast majority of DB funds are now in a healthy surplus, posing a significantly reduced risk of having to rely on the PPF. The PPF is, in turn, unquestionably well-capitalised.
“With the end of the financial year approaching, and schemes in the process of carrying out financial planning for next year, this decision provides very welcome clarity on the costs schemes will face and eases some of the reporting burden they face.”
Morten Nilsson, CEO of Brightwell, has branded the move a “landmark moment” for levy payers.
He said: “Granting the PPF greater flexibility in setting the levy is a pragmatic reflection of the strengthened funding position of defined benefit pension schemes and the sizeable reserve within the PPF.”
“With these changes now soon to be in law, I am delighted that the PPF board can reduce the levy for 2026/27 to zero, delivering the outcome we have been hoping for.”
Andy Smith, principal at consultancy Barnett Waddingham, went further to say the zero levy “raised an interesting question in my mind – could we ever be in a world where we have a negative levy? i.e. could schemes receive a refund of levies previously paid, given that with hindsight they may have been higher than ultimately required?”
He noted that “clearly the PPF’s primary role is long-term security, not redistribution. But as the risk landscape shifts, should the levy framework evolve with it?”
