Pension protection fund announces ‘welcome’ freeze in next year’s levy

A FUND designed to protect pension pots in the event of an employer going bust today unveiled a lower-than-expected increase in its levy, due to the tough economic climate.

The Pension Protection Fund (PPF) said the pension protection levy estimate for 2013-14 will be £630 million, the same aggregate amount that it expects to be collected for 2012-13.

The decision was welcomed by the CBI and National Association of Pension Funds as it will take the pressure off businesses with final salary – or defined benefit – pension schemes.

PPF chief executive Alan Rubenstein said: “We know that many employers are still struggling in the continuing economic turmoil. That is why, exceptionally, we have set a levy estimate that means schemes will typically see levies at similar levels in 2013-14 as they will for this year.”

However, the PPF warned that levy increases were “inevitable” if the current, high-risk conditions persisted.

Pension schemes are currently dealing with additional pressure as the Bank of England ramps up its levels of quantitative easing, which reduces the yields on government bonds that influence the size of a worker’s pension pot.

CBI director-general John Cridland said: “This move will relieve some of the financial pressure felt by many businesses with defined benefit schemes.

“We acknowledge that this is a one-off move by the board in light of the UK’s difficult economic position.”