In its response to the 2024/25 Pension Protection Fund (PPF) levy consultation, leading independent consultancy Broadstone expresses disappointment over the legislative constraints that impose an excessive levy on schemes, especially at the smaller end of the market.
However, Broadstone is generally supportive of the PPF’s direction of travel, namely around:
• Reducing the overall levy it wishes to collect;
• Updating its methodology to reflect changes in market conditions which means many more schemes no longer pay a risk based levy; and
• Seeking ways to simplify its methodology.
Given the improvement in the financial position of the PPF, the levy becomes less of a burden on schemes and so any steps that can be taken to simplify the process, thereby reducing costs, are to be welcomed.
However, Broadstone did express disappointment that the legislative constraints that limit the PPF’s options over the levy are yet to be resolved by the UK government.
The outcome of which is that schemes are being asked to pay levies totalling £100m, when even the PPF does not believe this is required.
Broadstone would, however, like the PPF to be more radical in its thinking about how it collects data from schemes as it believes there are plenty of opportunities to improve this, benefiting both the PPF and pension schemes.
Jaime Norman, Senior Actuarial Director at Broadstone, commented: “We are pleased with the PPF’s general direction of travel in this consultation to reduce the levy as well as update and simplify its methodology to reflect recent changes in market conditions.
“However, it seems perverse that existing government rules mean employers are being asked to pay a levy, albeit a reduced one, that even the PPF says is not required.
“This will inhibit business investment and economic growth so needs to be re-thought. “The Defined Benefit pension market has shifted rapidly due to the macro-economic environment in the past two years and the government needs to adapt accordingly to provide the PPF with the freedom it needs to make further, sensible tweaks to its levy.”
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