Defined benefit (DB) pension schemes are up in arms after being hit with an unexpected bill totalling more than £15m related to the Pension Protection Fund – despite pledges from the government to reduce the scheme and risk-based levies to zero.
Pensions UK, the industry trade body, and other large DB schemes are urgently lobbying the Department for Work and Pensions (DWP) after schemes received bills for hundreds of thousands of pounds relating to the Pension Protection Fund’s (PPF) administration levy.
This levy is separate from the main scheme and risk-based levies and has been suspended for the past two years (see below).
Pensions Expert understands that DB schemes have received bills for the administration levy for the first time in three years without warning or consultation from the DWP, the Pensions Regulator (TPR) or the PPF.
Zoe Alexander, director of policy and advocacy at Pensions UK, said: “There has clearly been a breakdown in process around the reintroduction of the PPF administration levy.
“We welcome the government’s efforts in the Pension Schemes Bill to reduce the risk-based PPF levy to zero. Now is the time to grasp the opportunity presented by the bill to also implement the outstanding recommendation of the 2022 review of the PPF and abolish the administration levy.”
Morten Nilsson, chief executive officer at Brightwell, which runs the £37bn BT Pension Scheme, said: “We were surprised by the decision to restart the PPF administration levy after a two-year suspension.
“We’d urge the DWP to consider legislative reforms that would allow for cross-subsidisation of the levy given the significant surplus the PPF currently has.”
Morten Nilsson, Brightwell
“The flat per-member charge disproportionately impacts larger schemes, and we’d urge DWP to consider legislative reforms that would allow for cross-subsidisation of the levy given the significant surplus the PPF currently has.”
A spokesperson for the Universities Superannuation Scheme (USS) told Pensions Expert: “After a review recommending its abolition and commitments to review and engage on future changes, the reinstatement of PPF administration levy invoices has come somewhat out of the blue.”
The spokesperson added that the pension scheme would be “sharing our views with government”.
Schemes hit with ‘significant unbudgeted costs’
Pensions UK said the bills had “surprised the sector” and left many facing “significant unbudgeted costs”.
The BT Pension Scheme has more than 258,000 members, meaning its administration levy bill is likely to be more than £374,000.
As the UK’s biggest private sector DB scheme with 554,000 members, USS could be facing a bill of more than £800,000.
On the Pensions Regulator’s webpage detailing the levy, it states that the administration levy was reinstated from 1 April 2025 “to ensure sufficient funds are available to meet [the] PPF’s administration costs”. This is despite the PPF reporting a £13bn funding surplus as of 31 March 2024.
“We are working with the DWP to secure the legislative changes needed to remove the administration levy to further reduce costs for schemes and their employers.”
PPF spokesperson
According to the regulator, administration costs can only be met using funds from the administration levy due to legislative restrictions. The DWP is currently working with the PPF to “consider alternative options”, TPR says, which “may involve the requirement for new legislation”. Pensions UK is now pushing for this to be included in the Pension Schemes Bill, which will be debated in parliament for the first time on Monday (7 July).
A spokesperson for the PPF said: “As decisions on the administration levy are taken by the DWP, we are working with them to secure the legislative changes needed to remove the administration levy to further reduce costs for schemes and their employers.”
Pensions Expert has approached the DWP for comment.
What is the PPF administration levy?
The PPF administration levy is separate from the scheme and risk-based levies that all private sector DB schemes pay to fund the lifeboat fund, based on covenant assessments and other metrics.
The administration levy is collected by the Pensions Regulator on behalf of the DWP. The department then uses it to fund a grant to the PPF to cover administration expenses for the lifeboat fund and Fraud Compensation Fund. Money is held separately from other PPF funds.
The levy is calculated on a per-member basis, meaning the largest pension schemes by membership have the largest bills to pay.
A 2022 review of the PPF, led by former Pensions Regulator chief executive Lesley Titcomb, described the administration levy as “less transparent” than the risk-based levy. The review added that it “appears to be an unnecessary complication for both the PPF and its stakeholders”.
Titcomb recommended that the administration levy be scrapped and the costs it covers paid for from the PPF’s existing surplus.
The levy was subsequently suspended from 1 April 2023, with TPR’s website stating that the administration levy fund had built up a surplus. Now that this surplus has reduced, the levy has been reinstated.
This article has been updated to add comments from USS and the PPF. A previous version of this article stated that the Mineworkers’ Pension Scheme, also administered by Brightwell, could face a PPF administration levy bill. However, the scheme is exempt and does not pay this charge.
