Revised estimates could lead to significant fall in pensions levy

The government’s multi­million pound levy on defined benefit pension schemes could be significantly smaller than recent estimates predicted.

The first bills for the Pension Protection Fund’s (PPF) risk-based levy will arrive in September, with the most recent estimate putting the expected total at £575m.

But in an exclusive interview with Personnel Today, the new PPF chief executive, Partha Dasgupta, said he anticipated the cost of the levy would drop when the final amount is confirmed.

He would not give an exact figure but said he was “very encouraged” and employers had responded well in addressing their liabilities and taking up PPF incentives to limit the levy’s impact.

“There are a lot of encouraging activities going on,” Dasgupta said. “Employers are being very responsive and responsible.”

For example, 1,000 of the 9,000 schemes covered by the levy had voluntarily completed deficit reduction certificates, which recognise special contributions companies have paid into their schemes, he said.

The PPF was launched in April 2005 to provide compensation for members of under-funded pension schemes when an employer becomes insolvent.

The exact amount each company will have to pay into the levy will depend on how well they have funded their own schemes.

The news of the reduction in the levy will be a relief to employers. Initial industry estimates that the levy would be required to collect £300m rocketed to £575m in December 2005.

Recent figures from the Office for National Statistics showed employer contributions to occupational pensions schemes in the UK have increased by 60% since last year.

Find out who is closing their defined benefit schemes

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