PPF ups fraud levy as claims spike forecast

PPF ups fraud levy as claims spike forecast

The Pension Protection Fund will raise an additional £5m this year in preparation for an expected spike in fraud-related compensation claims.

The levy will be paid by workplace pension schemes - both defined benefit and defined contribution - at a rate of an additional 25p per member.

The money will go into the Fraud Compensation Fund (FCF), and will be used to pay claims against employers where a loss was made as a result of dishonesty.

It is the first time the Fraud Compensation Levy has been raised since the 2012-13 tax year.

The Pension Protection Fund, which runs the FCF, stated it had "been notified of a number of possible claims which may come to the FCF in the next few years".

"Therefore, with forward planning in mind and to smooth the impact to schemes over time, the PPF is raising a levy of 25p per member – the same as in 2012/13. The levy is expected to raise around £5m in total.

"The FCF pays compensation to eligible work-based pension schemes – including defined contribution (DC) – where the employer is insolvent and the scheme has lost out due to offences involving dishonesty," the PPF stated.

The levy is collected by The Pensions Regulator alongside its general levy. The collection process began on 1 April.

Pension schemes are able to make a claim to FCF if the employer is unlikely to continue as a going concern; there is no likelihood of the pension scheme being rescued; and the value of the scheme’s assets has been reduced due to an offence involving dishonesty.

Unlike the PPF's main fund - which is exclusively for DB schemes - the FCF also covers DC schemes.