The Pension Protection Fund (PPF) has proposed a £100m levy estimate for 2025/26, equalling its lowest ever levy, with industry experts calling for legislation to be reformed to allow the PPF to propose even lower levies.

The PPF’s consultation is seeking views on the levy estimate and proposed approach to levy collection.

Maintaining the levy at the £100m level – equivalent to less than 0.007 per cent of total defined benefit (DB) scheme assets – is consistent with the approach the PPF consulted on last year.

The pensions lifeboat said it was engaging with the government on legislative change that would allow the levy to be reduced further, possibly to zero.

LCP partner, Steve Webb, called for this legislative reform to be enacted, describing the current situation with the PPF levy as “ludicrous”.

“The PPF levy has been cut substantially in recent years as the organisation’s financial position has improved. But now we have reached the ludicrous situation, driven by inflexible legislation, where PPF would like to cut the levy further but feels it would be irresponsible to do so,” Webb stated.

“A simple change to the law would allow the PPF to scrap its £100m levy for next year confident that if things deteriorated sharply, it could always be reintroduced.

“With a Pensions Bill set to go through parliament in the current session, it would be straightforward for the government to amend the law so that the levy could be further cut next year without undermining the financial stability of the PPF.”

Society of Pension Professionals (SPP) DB Committee chair, Chris Ramsey, agreed, saying there was a “strong argument” for the PPF to further reduce the levy.

“Unfortunately, the PPF is reluctant to do this as existing legislation prevents any annual increase beyond 25 per cent, which might be needed if the PPF’s finances were to deteriorate,” he said.

“Given the government has already confirmed its intention to pass a Pension Bill next spring, it would make sense for this restriction on the levy to be lifted in that legislation.

“This would enable a more sensible levy policy going forward, that doesn’t result in such an unnecessary collection of pension scheme money.”

The PPF said that stakeholder feedback last year underscored the importance of ensuring the risk-based levy continued to be paid by a broad range of levy payers, and ensuring that the levy continued to be distributed in the most risk-reflective way possible.

Its proposed changes will alter the distribution of the levy, but the PPF said that impacts will be limited.

The pensions lifeboat expected that schemes will pay broadly the same scheme-based levy as in 2024/25 and, of the schemes that pay the risk-based levy, 63 per cent would see a decrease, while 5 per cent would see an increase of more than 0.01 per cent of liabilities.

The PPF’s consultation also included proposals that aim to make it simpler for schemes to get levy credit for deficit reduction contributions.

“We’re proposing to charge a levy of £100m, as we did for 2024/25 – this is our lowest ever levy,” commented PPF executive director and general counsel, David Taylor.

“Meanwhile, we will continue to engage with the government on legislative changes to enable us to reduce the levy further and even to zero. We will keep progress on this under review and not charge for longer than we need.

“The proposed changes to our methodology will help to maintain the pool of risk-based levy payers, thereby spreading the levy more reasonably. More than half of those who pay a risk-based levy will see it decrease and there will be a marginal impact on those schemes who will see an increase.

“We’ve also acted on valuable stakeholder feedback to make it simpler for schemes to certify deficit reduction payments. I encourage stakeholders to respond, and we look forward to hearing views on our proposals.”

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