Government under pressure to reduce PPF levy
Mercer urges government to lower pension protection fund levy to give schemes "breathing space"
THE GOVERNMENT COULD step in and lower the Pension Protection Fund levy to give schemes “breathing space”, Mercer has said.
Schemes face levy payments rising by a quarter if low gilt yields continue over the next year, Accountancy Age’s sister publication Professional Pensions reports.
But Mercer said some schemes face even higher payments as the cap is based on an aggregate.
The consultancy argued the government could intervene to reduce the PPF levy and ease pressure on defined benefit schemes following a fresh round of quantitative easing last month.
Mercer UK PPF leader Mike Fenton (pictured) said it was within pensions minister Steve Webb’s power to reduce the cap and push the PPF levy down.
He said: “The aggregate amount the PPF expects to collect cannot be more than 25% of the amount that it collected in the previous year. However, some schemes could suffer increases of more than 25% and others may see no increase at all.
“The 25% amount noted in legislation is open to amendment. If pensions minister Steve Webb wants to ease the financial burden on pension schemes due to current market circumstances, it is in the government’s gift to amend the ceiling. This could even be down to zero which would result in no increase at all in aggregate.”
A DWP spokeswoman said the PPF levy was “a matter for the board of the PPF”.
She said: “The PPF sets the levy based on the level of risk exposure in the system to allow it to provide the finance for compensation payments to scheme members, while at the same time ensuring affordability for employers.
“We continue to work with The Pensions Regulator, PPF and other organisations to ensure the levy remains affordable and members remain suitably protected.”