On the go: The Pension Protection Fund has announced that it expects to collect £415m from its levy payers in 2022-23, a reduction of £105m from the previous year.
In a consultation launched on Tuesday, the pensions lifeboat revealed that 82 per cent of schemes that pay a risk-based levy are expected to see a reduction.
In a statement, the PPF stated that its “strong financial position throughout the pandemic, and defensive investment strategy, have been instrumental in its decision to allow the levy estimate to fall”.
David Taylor, executive director and general counsel at the PPF, said: “Despite the ongoing risk of employer insolvency, our levy payers’ improved funding positions, together with our financial strength, mean we can avoid raising our levy pre-emptively and maintain stability in our proposed levy rules.”
The levy has been reduced due to improvements in scheme funding, an update in the way scheme underfunding will be calculated, and employers’ financial resilience despite recent economic challenges, the consultation document revealed.
Meanwhile, several measures introduced to stem the impact of the pandemic will remain in place.
In September, the PPF granted a 90-day payment window to schemes impacted by Covid-19 for the second year running. It followed the halving of the levy for schemes with less than £20m in liabilities in January.
The PPF confirmed that these measures to help schemes and employers with the cost of the levy in 2021-22, including the small scheme adjustment, lower cap on the risk-based levy and Covid-19 easement, will remain in place. It also noted that the insolvency risk model was “working well”.
Taylor said: “While we’re pleased to see an overall improvement in scheme funding, we’re mindful of uncertainties around future insolvency rates and the ongoing risk of claims, some of which could individually have a material impact on our reserves.
“It’s therefore vital we continue to collect sufficient levy so we can ensure we can continue to pay our current and future members the compensation they’re entitled to.”
Chris Bunford, principal at LCP, noted that the “reduced levy estimate is mainly due to an improvement in individual schemes’ underfunding risk on updated PPF assumptions”.
He added: “The PPF’s latest analysis shows the pandemic has had a smaller impact on company accounts to date than was expected, and its strong funding position is allowing it to resist increasing levies whilst it sees whether a longer-term impact will emerge.
“Some companies with credit ratings will also welcome a more favourable insolvency score treatment."
The lifeboat’s levy consultation is open until November 9. PPF’s annual report and accounts for the 2020-21 year is due to be published in October.
