This year, the PPF levy was set to raise £100m, and today’s consultation proposes that the levy should raise a similar amount. However, PPF say that their finances are so robust that they do not actually need to raise a levy at all. The root of the problem is legislation which says that in future, if PPF finances were to deteriorate they could only increase the levy by a maximum of 25% from one year to the next. Perversely, if PPF were to abolish the levy when it wasn’t need it, they would be unable to bring it back because 25% of zero is zero. A simple change to legislation – perhaps rewriting the rules so that PPF could reinstate a levy if needed – would allow them to save employers £100m next year, confident in the knowledge that this would not cause problems in future if things deteriorated.
Steve Webb said: “The PPF levy has been cut substantially in recent years as the organisation’s financial position has improved. But now we have reached the ludicrous situation, driven by inflexible legislation, where PPF would like to cut the levy further but feels it would be irresponsible to do so. A simple change to the law would allow the PPF to scrap its £100m levy for next year confident that if things deteriorated sharply it could always be reintroduced. With a Pensions Bill set to go through Parliament in the current session, it would be straightforward for the government to amend the law so that the levy could be further cut next year without undermining the financial stability of the PPF”.
Chris Ramsey, Chair of the SPP DB Committee, said: “The SPP is pleased to see the PPF are consulting on the future of the levy and will certainly be responding.
We know that the levy has reduced substantially over the past few years, but it still stands at over £100m a year and a multi-billion-pound surplus has accrued.
We believe that there is a strong argument for the PPF to further reduce the levy, potentially to zero. Unfortunately, the PPF is reluctant to do this as existing legislation prevents any annual increase beyond 25%, which might be needed if the PPF’s finances were to deteriorate.
Given the Government has already confirmed its intention to pass a Pension Bill next Spring, it would make sense for this restriction on the levy to be lifted in that legislation. This would enable a more sensible levy policy going forward, that doesn’t result in such an unnecessary collection of pension scheme money.”
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