The Pension Protection Fund (PPF) has more than halved its levy estimate for 2025/26 to £45m, after the government confirmed that it is considering giving the PPF greater flexibility to reduce the levy it collects from pension schemes by relaxing restrictions.

The PPF previously postponed 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.

However, it has now acted to more than halve its levy estimate for 2025/26 to £45m, marking a "significant" reduction on the £100m estimate initially proposed and its lowest ever levy.

As a result of this, almost all schemes (99.7 per cent) are expected to see a reduction in levy next year.

In addition, the lifeboat has included a new provision in its levy rules that would enable the PPF Board to calculate a zero levy if appropriate changes that would give the PPF greater flexibility in setting the levy are brought forward, and sufficiently progressed, in the course of 2025/26.

Under current rules, the PPF has limitations on changing the levy it collects from schemes despite the PPF being in a strong financial position, following years of high levels of levy collected creating a secure cushion for defined benefit (DB) pension funds.

This decision was made following confirmation that the government is considering proposals to relax restrictions and give the PPF more flexibility to cut the levy, suggesting that removing this restriction will boost the amount of money schemes have to invest and for employers to grow their business, as they would be paying less each year to the PPF.

This also builds on the broader reforms announced by the Chancellor this week as part of the government's Plan for Change, including plans to unlock billions in surplus from DB pension schemes.

Pensions Minister, Torsten Bell, said: “The PPF is an important safety net for many pension savers.

"It is also one in a strong financial position, so it is time to change outdated rules that would force the PPF to levy pension schemes unnecessarily. This will free up funds that allow pension schemes or employers to invest, supporting savers and growth.

“This proposal, in addition to our plans to unlock billions of surplus from defined benefit pensions schemes, shows we are laser focused on making the long term changes that will grow our economy.”

PPF chair, Kate Jones, added: “We warmly welcome the government’s intent to give us the flexibility to reduce the levy. We ultimately don’t want to charge levy payers any more than we need to.

“On the back of our positive engagement with government, and based on our current risks, we’ve moved to reduce costs for levy payers and support sponsoring businesses. Importantly, we’ve also ensured we have the flexibility to review our approach if sufficient progress can be made on the changes we need.

Jones said that the PPF would also welcome further government consideration of PPF and Financial Assistance Scheme (FAS) indexation rules.

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

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