Pension Protection Fund rewards UK companies with a big cut in its annual levy

Oliver Gill
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The PPF's annual levy pays for the running of the lifeboat and helps fund insolvencies (Source: Getty)

Britain's pension lifeboat has slashed charges companies must pay by 10 per cent.

The Pension Protection Fund (PPF) today published its final levy rules for 2018/19. The new levy estimate totals £550m, down from £615m for 2017/18 – a figure that was finalised a year ago.

"Despite significant risks, we’re on track to meet our long-term funding target which means we can set the levy at this level," said PPF executive director and general counsel David Taylor.

Read more: Pension power: Sir Philip Green didn't swear at me, says lifeboat head

The PPF acts as a safety net for company pension schemes. If a firm falls into insolvency, its pension fund's assets and liabilities are transferred into the lifeboat. Similar to paying an insurance premium, the PPF charges companies with a retirement fund a levy, the level of which is linked to the chances of the company failing at some point in the future.

Taylor said the PPF has reviewed its methodology for calculating the chances of insolvency over the last year.

"We are also confirming today that we will use credit ratings where they are available, or a specific credit model for financial institutions, to assess insolvency risk," he said.

Read more: PPF deficits relax down but still on "life support"

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