Most U.K. defined benefit funds will see levies paid to the Pension Protection Fund fall next year, regulators said Sept. 11.
In the consultation, the PPF said it would cut the overall levy in half in 2024, to £100 million, thanks to its strong financial position, and that 99% of levy payers would see their levy fall from the amount paid in the current year. The PPF, the lifeboat for pension funds of insolvent U.K. employers, has £32.5 billion ($40.5 billion) in assets under management.
The London-based fund also said that while it is transitioning to a lower levy in the future, it is limited in its ability to make deeper cuts because it is legally prevented from reinstating higher levies if needed. PPF CEO Oliver Morley said in a news release that while current law was intended to protect levy payers from sharp increases, "it also effectively constrains how low we can allow the levy to fall without damaging our ability to respond to a funding challenge should one arise. We therefore plan to ensure the levy remains at or above £100 million in future years."
That prompted calls for the PPF to seek legal changes that would allow more flexibility depending on the fund's financial position.
Steve Webb, a partner with U.K. investment consultant Lane Clark & Peacock, called the PPF a success story financially.
"It is clear that PPF would like to go further but is constrained by the law. It is highly undesirable that PPF Is being forced to charge employers more than it needs to, simply because of the lack of flexibility to increase the levy again in future if needed. The government should change the law to allow deeper cuts now, which would be a boost to British industry without undermining the funding position of the PPF," Mr. Webb said in an emailed statement.
Jaime Norman, senior actuarial director at independent consultancy Broadstone, agreed. "The PPF has been doing a good job in letting the industry know that it is looking for ways to reduce the PPF levy year on year and the consultation backs this up," he said in a separate email.
The PFF consultation comment period ends Oct. 30.