The Pension Protection Fund (PPF) levy could rise by 10% for 2014/15 unless market conditions change.
This is after the levy was held for 2013/14. Speaking at the National Association of Pension Funds’ annual conference, Alan Rubenstein, chief executive of the PPF, said that an increase in levies is necessary if the PPF is to reach its target of achieving 100% funding, with the majority of risks hedged out by 2030, so it did not have to charge further levies. “If we are to have a properly funded PPF, we need to charge an appropriate levy in order to meet 2030 targets,” said Rubenstein. “In the long term, we still believe we can achieve the funding level we aspire to by 2030.”
The new levy formula used by the PPF calculates levies based on a scheme’s funding position. Well-funded pension schemes, therefore, will pay less than those that are poorly funded.
“Scheme funding has deteriorated significantly, which places a [greater] burden on the PPF,” said Rubenstein. “If a scheme is fully funded, it is less of a risk to us.”
He added that the level of risk the PPF is exposed to has steadily risen over the past 18 months and is currently just below the peak it reached following the collapse of Lehman Brothers.
Well-funded schemes, however, can expect to see their levy remain static or even fall, said Rubenstein.
