The Pension Protection Fund (PPF) has published its final levy rules for 2019/20, confirming the levy would be set at £500m, 9 per cent less than the previous year.
The levy is payable by all UK defined benefit (DB) pension schemes whose members would be eligible for PPF compensation if the scheme employer became insolvent and they did not have enough assets to pay benefits at PPF levels of compensation.
The pensions lifeboat also announced it would go ahead with plans proposed in September which will see it calculate a levy for commercial consolidators.
In its white paper on DB schemes published in March the government revealed plans to promote consolidation in the DB market to address concerns about widespread funding shortfalls among 5,600 schemes.
So far, only two consolidators have announced their intentions to come into this market: the Pension Superfund and Clara Pensions.
They will both have their levy calculated using the methodology created by the PPF for zombie schemes.
These rules were created in 2017 following to the BHS case, as the negotiations after the company went into administration in April 2016 ended in a £363m settlement with Sir Philip Green to fund a new independent pension scheme for 19,000 former BHS workers.
David Taylor, executive director and general counsel at the PPF, said the levy continued to play a vital role in the lifeboat’s funding strategy.
He said: "Despite significant risks, we’re on track to meet our long-term funding target which means we can set the levy at this level."
He added that PPF had taken on board feedback about its approach to commercial consolidators.
The Department for Work and Pensions (DWP) published a consultation on this matter last Friday (December 7), which was accompanied by guidance from The Pensions Regulator (TPR).
Mr Taylor said: "The levy rule we are publishing today dovetails with this. Our thinking on this will continue to evolve as the regulatory framework becomes clearer, but feedback has helped us establish a workable, risk-reflective rule for the 2019/20 levy year.
"Consultation responses have also helped us identify some immediate steps we can take to improve support to DB pension schemes generally in relation to paying the levy. We will continue to engage with them as we explore some of the longer term options."
maria.espadinha@ft.com
