The Pension Protection Fund has today published its consultation for the 2023-24 levy (to be invoiced in 2023). Citing the continued improvement in its financial resilience, the PPF expects to collect £200m, almost half of that estimated for 2022-23 (£390m), with around 96% of schemes predicted to see a levy reduction. Exceptions are those where underfunding has increased significantly.
Schemes in lower levy bands (1 to 3) are likely to see smaller reductions than those in bands 4 to 10, although some schemes in levy band 10 will see a slightly smaller reduction if their levy has previously been capped at 0.25% of s179 liabilities. The PPF does not expect to apply the cap to any schemes in 2023-24.
The PPF describes its 2023-24 proposals as a “first step toward… a lower and simpler levy”. As well as improvements to the PPF’s funding position, the downward trend reflects the PPF’s assessment that future claims will be lower because of improvements in schemes’ funding positions.
The PPF expects the reduction in the levy from £390m in 2022-23 to £200m in 2023-24 to be broken down approximately as:
Although the PPF wishes to reduce future levies significantly – recognising that its improving financial resilience raises the prospect of building up a surplus if levies are higher than necessary – it is concerned that existing legislation fetters its ability to increase levies in the face of an unforeseen change in fortunes or significant increase in claims.
The PPF considers that, if it needed to return to charging a materially higher aggregate levy, the most likely cause would be a decline in the PPF’s funding, rather than a general rise in the risk the PPF covers.
The PPF has identified four key design principles:
The deadline for responding to the consultation on next year’s levy is 5pm on 10 November 2022.
