The Pension Protection Fund (PPF) has launched its consultation on its plans for next year’s PPF levy (2026/27). The PPF has set out its intent to maintain a zero PPF levy for the c.5,000 conventional defined benefit (DB) schemes in the UK in 2026/27. The PPF recently recalculated the 2025/26 levy to zero on the back of encouraging progress of the levy provisions in the Pension Schemes Bill.
The PPF assesses that its current reserves – which are essential to protect against future risks – coupled with improvements in scheme funding means it doesn’t need to charge a material PPF levy. The PPF will continue to build financial security principally through its investment returns.
Retaining a zero-levy next year is dependent on the passage of the levy measures through the remaining substantive stages of the Bill. The PPF is required to publish its determination confirming its levy estimate and rules for 2026/27 before the end of the current financial year. Recognising that the Bill timings at this stage are unclear and could extend beyond when the determination needs to be published, the PPF has set out a flexible approach to align its decision making with progress on the Bill.
The PPF is prepared to allow as much time as possible for the Bill to progress through its remaining stages before confirming its approach on 2026/27. If there is sufficient certainty before the end of the financial year that the Bill’s levy measures will become law, the PPF plans to confirm a zero conventional levy for next year. If sufficient certainty hasn’t yet been achieved within this timeframe, the PPF has set out a fallback option for the conventional levy.
If required, this contingency would entail using last year’s levy estimate and rules, preserving the PPF’s independence on the levy in lieu of legislative changes. Importantly, this would include the same provision, as was recently used for the 2025/26 levy, enabling the PPF to recalculate the levy back to zero for 2026/27 provided the levy measures remain appropriate and progress sufficiently through the remaining stages.
The consultation confirms the PPF’s intent to continue to charge an ACS (Alternative Covenant Schemes) levy, reflecting these schemes pose different risks to conventional schemes. The PPF has proposed refinements intended to further improve the ACS levy for next year. It’s additionally set out its intent to conduct a wider review of the ACS levy methodology in the medium term to inform how the PPF might need to further adapt its approach to reflect market developments.
Shalin Bhagwan, Chief Actuary at the PPF, said: “Our intent for next year is to not charge a PPF levy to conventional schemes. Provided the legislative changes we need continue to make good progress and we have high confidence they will become law, we’ll then confirm a zero levy for next year. To align our decision making with the remaining passage of the Bill we intend to take a flexible approach and have prudently set out a fallback option if required. In the expectation that we’ll ultimately only be charging an ACS levy next year, we’d especially welcome views on our proposed rule changes and intend to conduct a wider review of the ACS levy methodology.”
The consultation will close at 5pm on 5 January 2026. Read the full consultation here.
The PPF will continue to support policymakers as they consider the Bill in its remaining parliamentary stages and to prioritise supporting the government’s consideration of PPF indexation levels, work unaffected by the recent move to zero levy and the PPF’s proposals for next year’s levy.
|
