Pensions Bulletin 2023/36

Our viewpoint

PPF decides to maintain future levy at £100 million a year

In launching its consultation on the 2024/25 levy, the Pension Protection Fund has signalled its intention to collect around £100m of levy in future years until and unless there is a significant change in the risks it faces or the legislative framework changes.  The PPF believes that £100m pa is the lowest level it can safely set the levy, reflecting a reasonable compromise between the possibility that the levies collected might not be needed, and retaining the ability to respond in future to adverse events and funding challenges within the current legislative framework.

For the 2024/25 levy year this means that the PPF expects to collect half of the £200m levy estimate for the current year (see Pensions Bulletin 2022/36).  This good news is expected to be shared by 99% of all schemes, with the remaining 1% expecting to see an increase due to individual scheme circumstances, such as where there has been a significant worsening in the sponsors’ insolvency scores.  The PPF expects that no scheme will have the risk-based levy cap applied in 2024/25.

Some of this good news is expected to have come through in the 2023/24 levy season, with the PPF expecting to collect around £30 million less this autumn than originally estimated – mainly due to an increase in bond yields.

The estimated reduction in the 2024/25 levy year is also mainly due to the increase in bond yields and, to a much lesser degree, insolvency score movements seen in the second quarter of this year.  The PPF is keen to limit methodology changes, but in order to collect £100 million of levy and remain within the current legislative requirement that at least 80% of the levy must be risk-based, the PPF proposes to increase the Levy Scaling Factor from 0.37 to 0.40 and reduce the Scheme-based Levy Multiplier from 0.000019 to 0.000015.  The PPF also plans to continue with liability assumptions version A10, instead of moving to the newer version A11 which would have reduced the total levy by a further £20m.

In addition, the PPF is proposing or considering the following adjustments for the 2024/25 levy year:

  • In collaboration with the Pensions Regulator, potentially updating the guidance on asset class reporting on Exchange to clarify the preference for schemes to report their investments primarily via the available asset categories, only using the more detailed risk factor stress impact methodology for particularly complex arrangements that can’t be adequately described in the asset mix
  • Potentially reducing the number of credit score providers it uses for the credit-rated scorecard for the 2024/25 levy year, to two out of the current three agencies used (S&P, Fitch and Moody’s), dependent on outcomes from commercial negotiations with these providers. The PPF considers the associated costs of operating this scorecard to be ineffective given the declining levy charge based on credit-ratings, the high level of overlap between data received from the three credit-scoring agencies, and the performance of the PPF model
  • Simplifying the process associated with employers using the Special Category scorecard, following the Subsidy Control Act 2022 which replaces the EU state aid regime operated in the UK
  • Clarifying that, where any asset-backed contributions have terminated and there are no future payments, there is no requirement to obtain a legal opinion for the ABC Certificates
  • No longer offering the option to apply for a Covid easement plan to pay the 2024/25 levy. Existing payment plan options continue to be available

In order to keep the levy at £100 million in the future, given the general improvements in scheme funding levels and so a reducing number of schemes needing to pay a risk-based levy, the PPF expects to need to make additional methodology changes and proposes that from 2025/26 one or more of the following may be used:

  • Increase the Levy Scaling Factor (the approach taken for 2024/25). This would increase levies for all schemes that pay risk-based levies
  • Change the asset and liability stress factors to reflect the more extreme adverse scenarios for which future levies may be required. This is likely to increase levies for schemes with growth-seeking portfolios more than those with well-hedged portfolios, thus satisfying the PPF’s criterion to reflect the level of risks schemes pose to the PPF
  • Introduce an additional factor to scale up liabilities, which could be adjusted from year to year to maintain a levy of £100 million. This fixed factor would reduce the funding level consistently across all schemes irrespective of their size or existing funding level and satisfy the PPF’s criteria to be risk-reflective, flexible, and simple

Consultation closes at 5pm on 30 October 2023 and we expect to see the Final Determination in December 2023.


With a shrinking population of risk-based levy paying schemes, the PPF is faced with a big challenge to keep within the legislative requirement to charge at least 80% in risk-based levy and follow its long-term aim to simplify and increase its focus on funding instead of insolvency risk.  The long-term proposals seem to satisfy these aims, but for schemes that are in PPF surplus under the current measurement approach but may end up having to pay a risk-based levy under these proposals, it remains to be seen whether any change in asset stress factors as part of the above proposals may make investments in UK equities and productive finance a step too far.

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Triple lock – Earnings growth likely to fix next year’s State pension increase

The publication, on 12 September 2023, of provisional earnings data for July 2023, suggests that next year’s increase in State pensions will be driven by earnings growth rather than price inflation.  The earnings measure that we understand the DWP uses to determine the earnings element of the state pension “triple lock” has a provisional value of 8.5%, whilst the latest published increase in the CPI (to July 2023) is 6.8%, with expectations that the September CPI figure used in the triple lock calculation will be lower.

This would see the old state pension rise to around £169.50 pw from April 2024, and the new single state pension to around £221.20 pw – annual rises of £700 and £900 a year respectively.


This earnings figure could yet be modified in a month’s time when we will also learn the price inflation element of the triple lock with the September CPI due out on 18 October.  There are also suggestions in the media that the Government could choose a different and lower earnings measure, arguing that the measure customarily used has been distorted by recent public sector pay settlements.  In any event, another substantial increase in the State pension is now on the cards, following on from this year’s CPI-driven 10.1% increase.  However, with a General Election now not far away, there is great interest in what the two major parties have to say about the triple lock going forwards.

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FRC adjusts money purchase projection rules

With only a few weeks to go before the new rules governing statutory money purchase illustrations have to be applied, the Financial Reporting Council has made a minor change to the annuitisation assumptions.  Version 5.0 of AS TM1, which had been settled in October 2022 (see Pensions Bulletin 2022/37), now acknowledges that where there is a legal requirement to provide a survivor’s pension then this should be allowed for when illustrating the projected pension.


The FRC’s rules had, until this adjustment, required these illustrations to be carried out assuming the projected DC pot is turned into a member-only non-increasing pension – only allowing for increases where there is a legal requirement so to provide.  The added requirement to allow for survivor pensions is likely to impact very few schemes, such as those money purchase schemes that had previously contracted out on a salary-related basis with GMP or other underpins and as such have a survivor pension requirement built into their rules.

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Auto-enrolment extension Bill nears Royal Assent

The Private Member’s Bill that implements the Government’s 2017 auto-enrolment review conclusions (see Pensions Bulletin 2023/09) looks set for a speedy passage through the House of Lords.  With the Lords agreeing to skip Committee stage on 12 September, the likelihood now is that the Bill will complete all stages before Parliament goes into Conference recess next week.


Once the Pensions (Extension of Automatic Enrolment) (No. 2) Bill receives Royal Assent the DWP will be able to consult on the implementation approach and the timetable for the proposed auto-enrolment expansion, that earlier this year was being lined up for this autumn.

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Gill Furniss is Labour’s new shadow pensions minister

Following last week’s announcement about Liz Kendall taking over as shadow Work and Pensions Secretary (see Pensions Bulletin 2023/35), Gill Furniss has now replaced Matt Rodda as shadow Minister for Pensions.

Ms Furniss has been MP for Sheffield, Brightside and Hillsborough since 2016.  Her previous positions in Parliament include shadow Minister for Transport, shadow Minister for Women and Equalities and shadow minister for Steel, Postal Affairs and Consumer Protection.

The full list of Labour’s current Work and Pensions team can be found on their Shadow Cabinet page.

CommentMs Furniss’ appointment comes at a very interesting and pivotal time for British pensions with the pensions minister, Laura Trott, advancing an ambitious agenda on several fronts.  Although Ms Furniss has not apparently had significant involvement with pensions policy before we wish her well in getting up to speed quickly on her brief and hope she will make a positive contribution to the discussions about pensions policy.

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Does anyone “whistle-blow” these days?

The Pensions Regulator has reported that during the year ending 31 March 2023 it received just 7 reports that it classed as whistleblowing reports under the Pensions Act 2004.  This reduction follows the Regulator implementing a new (unpublished) policy that outlines precisely what a whistle-blower is from the Regulator’s perspective.  However, the reporting in previous years was not particularly high, with a peak of 30 being recorded for the year ending 31 March 2022.

The Regulator says that it does “continue to receive a large volume of reports from savers and our regulated community highlighting concerns in relation to breaches of pension regulations”, but it would appear that the vast majority of these do not class as “information concerning wrongdoing” relating to workplace pensions.


The requirement for certain individuals to report their concerns to the Pensions Regulator goes all the way back to Pensions Act 1995 law when the Regulator’s predecessor used to receive many more reports, a lot of which concerned minor breaches of pensions law.  Although the amount of reporting has been much lower in recent times, aided by the Regulator’s traffic light guidance, the news that those classing as a clear concern is barely a trickle could either be a signal of the high level of compliance by schemes on the things that matter, or that the policy is not working – or maybe a bit of both.

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This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.

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