The Pension Protection Fund (PPF) has confirmed that its target levy collection for 2024/25 will be halved to £100m, with the Department for Work and Pensions (DWP) to introduce legislative changes to allow for further cuts in future “when parliamentary time allows”.

The news was confirmed as the lifeboat shared its final levy rules for 2024/25, revealing that it would push ahead with a 50 per cent reduction in its target levy collection to £100m next year, down from £200m in 2023/24.

This is the lowest ever levy charged by the PPF since it came into operation in 2005, and almost all PPF-eligible defined benefit (DB) schemes in the UK are expected to see a further reduction in their levy next year as a result.

However, the PPF acknowledged that its ability to reduce the levy further is, in effect, constrained by current legislation, with a number of industry organisations previously raising concerns around the current PPF levy framework.

The issues stem from legislation introduced when the PPF was set up nearly 20 years ago, which aimed to protect levy payers from sharp rises in the levy by imposing a limit of 25 per cent on year-on-year increases to the levy target.

However, this now effectively constrains how low the levy can fall without damaging the PPF’s ability to respond to a funding challenge should one arise in future.

And whilst the majority of respondents to the PPF's consultation understood and supported the PPF’s approach in light of the legislative constraints, almost all felt strongly that legislation should be changed as soon as possible to allow the PPF to move to a much lower or even a zero levy.

The PPF also said that it "appreciates and fully agrees" with many respondents' comments that this is a less than ideal situtation, confirming that it has been actively engaged with the DWP on the legislative changes that would allow more flexiblity in future.

The lifeboat also confirmed that it has shared the consultation responses with the DWP, which will consider the points raised and expect to legislate as soon as parliamentary time allows.

PPF executive director and general counsel, David Taylor, added: “Next year’s target collection of £100m will be the lowest levy we’ve ever charged. As a result, almost all schemes will see a fall in their levy.

“The possibility of zero levy in future has come closer into sight. To further reduce the levy in future, we need legislative change; I’m grateful that DWP are considering this.”

---