The Board of the Pension Protection Fund (PPF) has confirmed its intention not to change the levy rules for 2014/15. This is in line with its policy (introduced for the 2012/13 levy) to set the levy rules for three years at a time in order to reduce volatility in schemes’ levies and enhance predictability. 2014/15 will be the final year for the current rules.
How will the 2014/15 levies compare with 2013/14 levies?
The PPF’s estimate of the total levy it expects to collect for 2014/15 is £695 million, compared with £630 million for 2013/14 – that is an increase of about 10%. The increase is a result of movements in Gilt yields. Because yields are averaged over a rolling 5-year period, in 2014 the relatively higher yields that prevailed during 2008/09 will cease to be included in the average, to be replaced by 2013/14 yields. The increase in individual schemes’ bills will vary.
For 2013/14, the PPF made a one-off adjustment to the levy formula, to protect schemes from the effect of falling yields which would, otherwise, have led to significantly higher levies this year. However, it warned at the time that this was an exceptional measure to reflect difficult economic conditions and that future increases in the levy should be expected if these conditions persisted – which they have.