The Pension Protection Fund (PPF), the UK’s lifeboat pension fund, has proposed to keep the levy it charges pension funds at zero for 2026/27, as it launches a consultation on its plans.
The move would see circa 5,000 of conventional defined benefit (DB) pension funds continue not to pay the levy in the next financial year, after the PPF set the levy to zero in 2025/26 on the back of encouraging progress of the levy provisions in the Pension Schemes Bill.
Originally, the levy for 2025/26 was set at £45m but included a provision to recalculate it to zero if legislative change advanced sufficiently.
The Bill, introduced in July, contains measures allowing the PPF to move to a zero levy while retaining the ability to reinstate it if needed. It has since cleared the Commons Committee stage.
The PPF assesses that its current reserves – which are essential to protect against future risks – coupled with improvements in scheme funding, mean it doesn’t need to charge a material PPF levy.
The lifeboat fund said it will continue to build financial security principally through its investment returns.
However, it pointed out that retaining a zero-levy next year is dependent on the passage of the levy measures through the remaining substantive stages of the Bill.
The determination confirming the levy estimate and rules for 2026/27 will be published before the end of the current financial year. However, the PPF acknowledged that the Bill’s passage could extend beyond that point, and has outlined a flexible approach allowing it to adjust depending on legislative timing.
PPF added that it is prepared to “allow as much time as possible for the Bill to progress through its remaining stages before confirming its approach on 2026/27”.
If there is sufficient certainty before the end of the financial year that the Bill’s levy measures will become law, the PPF plans to confirm a zero conventional levy for next year, it said. If not, it will revert to the previous estimate and rules as a fallback.
The consultation confirms that while conventional schemes would see their levy reduced to zero, Alternative Covenant Schemes (ACS) will continue to be charged, reflecting the different risks these schemes pose.
Shalin Bhagwan, chief actuary at the PPF, said: “Our intent for next year is not to charge a PPF levy to conventional schemes. Provided the legislative changes we need continue to make good progress and we have high confidence they will become law, we’ll then confirm a zero levy for next year.
“To align our decision-making with the remaining passage of the Bill, we intend to take a flexible approach and have prudently set out a fallback option if required.”
Read the digital edition of IPE’s latest magazine
