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PPF cuts levy estimate to £635m

The Pension Protection Fund has reduced its annual levy estimate for 2015/16 to £635m, some 9 per cent lower than the 2014/15 figure.

The lifeboat fund says an improvement in its funding position has allowed it to reduce its levy prediction from £695m in 2014/15. The levy is collected by the PPF from UK defined benefit pension schemes.

PPF chief executive Alan Rubenstein says the fund expects levies to fall further over the next two years.

He says: “We recently said in our funding strategy update that we remain on course to meet our long term funding target of self-sufficiency by 2030, but substantial risks remain. 

“We have therefore chosen to continue our approach from the first triennium in setting the overall levy rate for the coming year. This means we have sought to neutralise the wider levy changes, allowing the impact of improved funding to bring the quantum down.

“As a result we will seek to collect a reduced amount in 2015/16 in line with changes in current risk that we have seen. While the future is inevitably uncertain, levy estimates for the following two years appear likely to fall further rather than rise, based on the expected path of asset values and yields.”

The PPF has also amended the way it calculates the levy, allowing companies greater flexibilities to use asset backed contributions to reduce their bill.

An ABC is a contractual funding arrangement under which an income stream is provided to a scheme, usually via a special purpose vehicle. That income stream is usually given a net present value by the trustees and is treated as an asset, thereby reducing or eliminating the scheme’s deficit.

CBI head of pensions Jim Bligh says: “The PPF has made some much-needed and important changes to the way it calculates the levy, particularly in allowing greater flexibility for asset-backed contributions. It is good news that the PPF will now collect less money overall from the business community because of its strong investment performance.”

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