Partner Article

Pension Protection Fund announces £630m levy

Pensions will be protected by a £630m levy, as announced on Tuesday by the Pension Protection Fund (PPF).

The levy for 2013/14 is the same as 2012/13, despite an original estimate of £550m, while PPF expects to come up against high levels of risk.

PPF’s fund is a safeguard for pensions when an employer becomes insolvent, and the funding organisation warned that future levy increases were “inevitable” if risk factors did not fall.

Alan Rubenstein, chief executive of PPF commented: “We have seen pension scheme funding deteriorate significantly in the last eighteen months.

“We have seen that reflected in claims in the current year, which already exceed our annual levy.

“Therefore, it should come as no surprise that this level of heightened risk would ordinarily result in a substantial increase in the levy estimate, up to the maximum permitted, particularly as our levy framework is designed specifically to respond to changes in risk of this nature.

“However, we are realistic and have listened. We know that many employers are still struggling in the continuing economic turmoil.”

Tuesday’s announcement was welcomed by business lobbyist CBI’s director-general, John Cridland, who said the board had made the right decision.

Mr Cridland said: “Businesses will welcome the PPF Board’s decision to take account of the wider economy in setting the levy estimate for 2013/4, in line with the CBI’s request.

“This move will relieve some of the financial pressure felt by many businesses with defined benefit schemes.”

The National Association of Pension Funds (NAPF) applauded PPF’s “pragmatic decision”.

NAPF chief, Joanne Segars, commented: “While any increase at the current difficult time is unwelcome, it does reflect that the risks to the PPF have increased. The rise would have been more had it not been for the PPF’s approach.

“The PPF’s decision to keep a lid on the increase in the levy is realistic. It strikes a balance between protecting schemes from major extra costs and ensuring the PPF’s finances are strong and sustainable.”

This was posted in Bdaily's Members' News section by Miranda Dobson .