Pension fund levy estimate welcomed

Updated: 
John CridlandA fund designed to protect pension pots in the event of an employer going bust has unveiled a lower than expected increase in its levy due to the tough economic climate.

The Pension Protection Fund (PPF) announced that the pension protection levy estimate for 2013/14 will be £630 million, the same aggregate amount that the PPF expects to be collected for the 2012/13 levy year.


The decision was welcomed by the CBI and National Association of Pension Funds (NAPF) as it will take the pressure off businesses with so-called defined benefit schemes.

PPF chief executive Alan Rubenstein said: "We have seen pension scheme funding deteriorate significantly in the last 18 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. That is why, exceptionally, we have set a levy estimate that means schemes will typically see levies at similar levels in 2013/14 as they will for this year."

The PPF warned that levy increases in future were "inevitable" if the current high risk conditions persisted.

Pension schemes are currently dealing with additional pressure as the Bank of England ramps up its levels of quantitative easing, which reduce gilts - the yields on government bonds which influence the size of a worker's pension pot.

CBI director-general John Cridland said: "This move will relieve some of the financial pressure felt by many businesses with defined benefit schemes. We acknowledge that this is a one-off move by the board in light of the UK's difficult economic position."

NAPF chief executive Joanne Segars welcomed the PPF's "realistic" and "pragmatic" decision. She said: "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."

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