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PPF to dramatically reduce levies

PPF to dramatically reduce levies

02 Dec 2022

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What you need to know

On 29 September 2022 the Board of the Pension Protection Fund (PPF) published its consultation on the rules for the 2023/24 levy to be invoiced autumn 2023.

  • Despite significant market turmoil over the last year the PPF’s funding position remains strong which enables the PPF to reduce the total levy estimate for 2023/24 to £200m, down from £390m in 2022/23.
  • The levy scaling factor and scheme based multiplier are to reduce, and the levy rates will be lower, especially for the weaker levy bands.
  • The PPF has removed the maximum year on year increase of 25% to the risk-based levy.
  • According to the PPF’s impact analysis, around 96% of schemes can expect to pay a lower risk-based levy for 2023/24, with the greatest savings for those schemes in levy bands 4 to 10.
  • Schemes where the underfunding or insolvency risk has increased significantly, or where they previously benefitted from the 25% risk based levy increase cap, could still see an increase in levy.
  • The planned moved to the three-tiered approach to collecting asset information has now come into force. The PPF has published further detail of how this will work in practice. For many schemes with liabilities over £30m this may require new and/or more detailed information.

Actions you can take

Along with being aware of the changes, it will be important to reflect changes in decisions being made now:

  • Understand what the new rules could mean for your scheme’s levy. Obtain an estimate of your 2023/24 levy to help you plan ahead.
  • Assess the impact of the new rules on other levy mitigation measures. Given the likely reduction in levies, schemes should ensure any levy saving actions are still cost effective.
  • Liaise with your investment advisors to ensure the correct asset split information is available depending on your allocated tier.

For further information, please get in touch with Emily Sturgess, Kevin Burgess or speak to your usual XPS Pensions contact.

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