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Pension Protection Fund Levy Q1 2022

03 February, 2022

Giles Stendall

Senior Manager, The Midlands, PwC United Kingdom

+44 (0)7792 082 163


The PPF levy deadline is March 2022: Are you prepared?

The Pension Protection Fund (PPF) levy funds the protection of pension savings, in the event that a company can not meet its pension obligations, and is payable by all UK defined benefit pension schemes. The PPF levy is now on the minds of companies and pension trustees with the deadline to act being 31 March 2022, before the payment is calculated for 2022.

Ahead of this deadline, we’ve spoken with businesses and engaged in the PPF’s consultation on its guidance, so that we can share our top three changes for you to know about this year:

1. Variability in PPF levy invoices in 2022

For the most part, the PPF’s rules in 2022 remain stable, in particular benefiting from retaining the cap for higher levy payers, and the discount for small pension schemes. Most pension schemes should see a reduction in their levy in 2022.

But financial metrics for many companies have weakened during the pandemic, and just a one-notch change in the PPF credit score triggers an average 35% increase in the levy payable (average increase across band 1-10). Companies and trustees can estimate the likely change in levy score and consider options to strengthen the employer covenant and credit score.

2. Levy savings using a Guarantor Strength Report (GSR)

The PPF confirmed its GSR regime worked well last year. The PPF’s approach to scrutinising company guarantees for pension schemes remains broadly unchanged.
But our work with clients has highlighted a lot of corporate structuring activity this year. Companies and trustees can test the impact on the PPF levy of any structure changes, and the mitigating effect of certifying a guarantee.

3. Alternative covenant schemes (ACS)

There is a risk that for some pension schemes captured by the PPF’s new ACS approach, a higher PPF levy may arise.

Companies and trustees can assess the risk of the changes affecting their company and pension scheme, and engage with the PPF where needed, especially for innovative employer covenant or investment structures. For example, new employers, consolidators, contingent assets, and capital backed investment plans, all need to be reviewed as they will impact the PPF levy calculation.

Act before the deadline in March 2022

The easiest win right now is for businesses and trustees to check the PPF levy score on the PPF levy website. That way you can avoid any surprises when your next invoice arrives.

Secondly, consider your options to improve security for pension members, while at the same time helping to manage your PPF levy. For example, identifying which companies are in the strongest position to support your pension scheme, or putting in place a guarantee or other contingent assets to underpin pension benefits.

If you’d like to talk about any of the changes to the PPF levy, please get in touch.

Giles Stendall

Senior Manager, The Midlands, PwC United Kingdom

+44 (0)7792 082 163


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