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FSCS urged to follow suit as PPF cuts levy to £550m

The Pension Protection Fund has cut the levy it charges to insure UK defined-benefit schemes from £600m this year to £550m next year.

The decision was announced last week alongside a consultation that set out a series of changes to the way the levy is calculated.

The proposed changes include reflecting the investment risks taken by pension funds in their payment calculation, smoothing measures of scheme funding so that sharp movements in assets and liabilities do not cause large changes in levy payments and fixing the levy formula for three years.

PPF chief executive Alan Rubenstein says: “The further reduction in the amount of levy we want to collect again recognises our desire to protect employers and pension schemes, which are still navigating choppy waters, while remaining mindful that we also have to protect our own financial position.

“The rules for our new levy framework will enable schemes to plan for their levy bills for the next three years. I would encourage schemes to take risk-reduction measures as they have a direct impact on the amount of levy they pay.”

The National Association of Pension Funds chief executive Joanne Segars says: “The levy reduction helps give some respite from the heavy financial pressures of running a DB scheme, especially when the economy is so weak.

“The PPF’s reformed levy creates a closer link between a scheme’s risk and the levy it has to pay and is a step forward.”

Informed Choice managing director Martin Bamford says the Financial Services Compensation Scheme should adopt a similar approach.

He says: “The FSCS could follow suit by setting out a more detailed levy framework to ensure fairness and stability. It would be great to see a longer-term view on funding being taken by the FSCS as well because surprise interim levies can be incredibly damaging to small IFA businesses.”

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