The PPF’s £14 Billion Question: Who Should Benefit from the Surplus?

The Pension Protection Fund (PPF) has built up a staggering £14.1 billion surplus—an outcome of prudent investing, recoveries from insolvent employers, and collecting the annual PPF levy from employers. While this financial strength is reassuring, it raises a pressing question: what, if anything, should be done with it?

Currently, around 5,000 companies have been paying a PPF levy. £104m was collected from pension scheme employers in the same year that the £14 billion surplus was announced, a tiny fraction but surely superfluous given the reserves in question. Thankfully, this levy collecting will change. The Pension Schemes Bill 2025 gives the PPF greater flexibility in setting levies, and they have recently announced that they won’t be charging pension schemes anything for 2025/26. Stop collecting more money seems like the first and most obvious action from such a surplus. But what next?

To the current cash waiting, what are the options?

One idea is to return the surplus to levy-paying employers. But this is fraught with complexity—some companies will have gone insolvent and drawn on the PPF since paying their levies, whilst others could have paid in millions whilst requiring nothing from the lifeboat funds. One thing is for certain: calculating fair refunds would be costly and time-consuming.

Another option is to enhance member benefits. PPF members don’t receive inflation increases on pre-1997 pension in payment, meaning their income erodes over time. For example, £100 paid in 2006 when the first payments began is worth around £58 in today’s money in real terms. Boosting these benefits would directly support members who’ve already lost out once through employer insolvency. Surely this option is a no-brainer? The snag here is that the PPF is a public body. As such any alteration to member benefits first needs a change in the 2004 legislation set by the government. Whilst the Minister for Pensions commented in April 2025 that they would consider the compensation framework set for the PPF, they have hinted that increasing benefits could impact how the surplus is accounted for on public balance sheets - an argument that feels more political than principled.

The office for national statistics views the levies received by the PPF as tax receipts. This is sharp contrast to the message usually given to employers that their payments fund a lifeboat for pension schemes in trouble. With the PPF being a public body, we wonder if there is potential for the government to claim that any use of it’s assets would fall under broader public spending rules. Rachel Reeves has introduced strict fiscal rules, amongst them that day-to-day spending must be funded by tax receipts and public investment must reduce debt. Within these rules, it may be difficult for the PPF to use it’s surplus to invest in stronger member benefits, even if the money appears to be available to do so and the PPF themselves are in favour of such a move.

Keeping the surplus as a buffer is another possibility, that would avoid putting a dent in the public balance sheet whilst providing members with longer term security. With such a large cushion already in place, this feels overly cautious. The 2024/25 annual report from the PPF places the total value of annual PPF claims on the Fund at £1.2 billion with new claims of £63 million in 2025. Large figures, but with an increase in the reserves of £1 billion, these claims are clearly easily offset by returns on growth assets held by the fund at 6.0%. Could the PPF reinvest in its own infrastructure or innovation? Perhaps—but the priority should be people.

Ultimately, the fairest path may be a blend: use the surplus to improve member outcomes, particularly for those with pre-1997 pensions, while exploring a modest return to levy payers. With billions in the bank, the PPF has both the means and should surely start to seek the mandate to start giving back - whether to members who deserve more security, or to employers who can reinvest in the future.