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XPS Pensions Group urges employers to act quickly to take advantage of large reduction in PPF levy

XPS Pensions Group urges employers to act quickly to take advantage of large reduction in PPF levy

28 Sep 2021

Consistent with the approach adopted last year, the Pension Protection Fund (PPF) has issued another consultation on how it will set levies for the next year only, rather than for the typical longer three-year period. Improvements in market conditions combined with updated assumptions to reflect recent improvements in buyout pricing has resulted in schemes being better funded. The ensuing total levy estimate across all schemes is £415m, a £105m reduction compared to last year, providing welcome relief to levy payers in these difficult times.

Emily Sturgess, Head of PPF Solutions at XPS Pensions Group said

“Schemes and employers will be relieved to see the PPF continuing to support levy payers by way of a lower total levy. Even with this reduction, however, there will still be winners and losers next year and schemes that see a sharp increase in the insolvency risk of their employer may still see an increase in their levy next year.

There are several actions that employers and schemes can take now to ensure that their levy is as low as possible. Acting early can help schemes ensure they pay no more than necessary next year to benefit from the grace period that the PPF is providing and can also help prevent large increases in years to come. Acting now is crucial to manage the uncertainty of the impact COVID-19 may have on levies in the long term.”

Pension schemes can take actions to manage PPF levies including:

  • Reviewing the information held by the PPF’s insolvency risk provider Dun & Bradstreet and considering the impact of updating employer accounts.
  • Reviewing the valuation used by the PPF to set levies.
  • Using contingent support, particularly if a funding review is currently underway.
  • Using the full range of measures available to schemes and employers to reduce their PPF levies where possible.
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