A pensions lifeboat scheme has said it will not charge a levy this year to pension providers, saving £45 million across 5,000 defined benefit (DB) pension schemes.
The Pension Protection Fund (PPF) levy is a charge on eligible pension schemes that pays into a central reserve, which sits at a £14 billion surplus.
DB schemes promise pension savers a certain level of pension, based on their salary.
The PPF steps in to protect employees’ pensions if their firm collapses.
This decision is due to reforms set out in the Pension Schemes Bill, the Government said.
Pensions minister Torsten Bell said: “Rigid rules currently leave pension schemes paying millions into the Pensions Protection Fund even when extra funding is not required.
“The Pension Schemes Bill will sweep away those constraints.
“This will support better funded pension schemes and greater investment by firms.”
The Pension Schemes Bill rewrites rules around the levy making it easier for the PPF to adjust it year-on-year and without risking losing the power to charge if it drops to zero.
This gives more flexibility to free up money in times of high surpluses.
In view of its strong financial position, the PPF announced it would more than halve the 2024/25 levy to £45 million for the financial year 2025/26 but it has now said the levy will be reduced to zero, without risking its ability to pay its members’ benefits.
Kate Jones, PPF chairwoman said: “I’m pleased that we’re able to save DB schemes £45 million this year.
“The legislative changes we’ve needed to further reduce the levy have made good progress, giving us the confidence to act decisively for this year’s levy.”
