The Pension Protection Fund (PPF) has confirmed that it will postpone its decision regarding the 2025/26 levy, to allow more time for legislative changes to provide greater flexibility and ultimately enable it to set a zero levy.

The PPF will now look to finalise and publish its levy determination and rules for 2025/26 by the end of January.

The decision was made following positive engagement with stakeholders as part of the PPF's consultation on the 2025/26 levy rules, which had suggested that, pending legislative change, the PPF would maintain the levy at £100m next year.

However, the PPF has now decided to delay its decision regarding the 2025/26 levy, as it confirmed that it is working closely with the Department for Work and Pensions (DWP) to consider all options following the consultation, including reducing the levy further before any legislative change.

PPF chair, Kate Jones, said: “The board is grateful to those who responded to our consultation and for the chance to openly engage with other key stakeholders.

"We need to balance the needs of all our stakeholders with our financial responsibilities and have been actively considering a wide range of options. To allow more time for this work, including engagement with colleagues at DWP, the board will conclude its decision on next year’s levy in January.

“We recognise the need to minimise uncertainty for levy payers but trust taking the time to get this right will be viewed positively. Ultimately, we don’t want to charge the levy for any longer than is needed and are working towards this goal."

In addition to this, the PPF said that further government consideration of PPF and Financial Assistance Scheme (FAS) indexation rules would be "welcomed".

"We will continue to work constructively with DWP in the interests of all our stakeholders," Jones said.

The decision has been welcomed by industry experts, with the Pensions and Lifetime Savings Association (PLSA) highlighting the PPF's decision as a "pragmatic step" to allow more time for the government to commit to reforming the legislation.

PLSA director of policy and advocacy, Zoe Alexander, said: “It is very positive the PPF has decided to hold back its decision to set the levy defined benefit pension schemes pay to support its operation.

"This is at a time when pension funds are being asked to increase investment in productive assets and sponsoring employers are facing higher costs due to the increase in employer National Insurance contributions," she continued.

“The move keeps open the possibility of the PPF reducing the levy ultimately to zero, provided the DWP can swiftly commit to reforming legislation, as part of the Pension Schemes Bill, to allow the PPF to raise more levy should there be higher claims on it in the future.

"We also support PPF’s dialogue with DWP on further government consideration of PPF and FAS indexation rules.”

This was echoed by Brightwell CEO, Morten Nilsson, who said: “We welcome the PPF's announcement that it is delaying a decision on the 2025 / 2026 levy.

“A well-functioning, safe and robust defined benefit (DB) sector is in everyone’s interest and the PPF has a key role in ensuring this.

“But, given the significant surplus within the PPF, it cannot be right to continue to impose substantial levies on pension schemes and sponsors diverting resources that could otherwise be invested in the UK economy.

“Urgent legislative reform is needed to allow the PPF greater flexibility in setting the levy, and to allow for a zero levy. We hope to see this in the forthcoming Pension Schemes Bill.”

Society of Pension Professionals DB Committee chair, Chris Ramsey, also welcomed the decision as a "step in the right direction", stating: "The annual levy is money that the PPF readily admits it does not need because of its multi-billion-pound surplus.

"If a legislative change can be secured in the 2025 Pensions Bill, this would mean pension schemes would no longer have to bear an unnecessary £100m annual cost, and this money could instead be used to help members, employers and the wider economy.

"We are not there yet, but the announcement from the PPF today, confirming they are in dialogue with DWP, is certainly a step in the right direction and one that the SPP welcomes."

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