The Pension Protection Fund (PPF) has launched a consultation on its plans for next year’s levy, confirming its intent to maintain a zero levy for UK conventional defined benefit (DB) schemes in 2026/27.

The PPF recently confirmed that it had recalculated the 2025/26 levy on the back of recent progress made by the Pension Schemes Bill, which includes measures designed to provide greater flexibility in how the levy is set.

The latest update confirmed that the lifeboat's continued reserves, which are essential to protect against future risks, coupled with further improvements in scheme funding, mean it doesn’t need to charge a material PPF levy.

Instead, the PPF will continue to build financial security principally through its investment returns.

However, the PPF confirmed that retaining a zero-levy next year is dependent on the passage of the levy measures through the remaining substantive stages of the bill, although timings at this stage remain unclear.

In recognition of the fact that the passage of the bill could extend beyond the end of the current financial year, at which point the PPF is required to publish its determination confirming its levy estimate and rules for 2026/27, the PPF has set out a flexible approach to align its decision-making with progress on the bill.

As part of this approach, the PPF said 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 levy measures will become law, the PPF plans to confirm a zero conventional levy for next year.

However, if sufficient certainty hasn’t yet been achieved within this timeframe, the PPF has set out a fallback option for the conventional levy, which would allow it to use last year’s levy estimate and rules, preserving the PPF’s independence on the levy in lieu of legislative changes.

Importantly, this would include the same provision, as was recently used for the 2025/26 levy, enabling the PPF to recalculate the levy back to zero for 2026/27, provided the levy measures remain appropriate and progress sufficiently through the remaining stages.

Commenting on the update, PPF chief actuary, Shalin Bhagwan, said: “Our intent for next year is to not 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.

Some costs will remain, however, as the PPF's consultation confirmed that the lifeboat intends to continue to charge an alternative covenant schemes (ACS) levy, reflecting that these schemes pose different risks to conventional schemes.

There are, however, proposals for refinements intended to further improve the ACS levy for next year.

The PPF also confirmed its plans to conduct a wider review of the ACS levy methodology in the medium term to inform how the PPF might need to further adapt its approach to reflect market developments.

"In the expectation that we’ll ultimately only be charging an ACS levy next year, we’d especially welcome views on our proposed rule changes and intend to conduct a wider review of the ACS levy methodology," Bhagwan said.

Alongside the update on the levy, the PPF confirmed that it is continuing to prioritise supporting the government’s consideration of PPF indexation levels, with this work unaffected by the recent move to zero levy and the PPF’s proposals for next year’s levy.

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