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The Levies

The Pension Protection Fund is partly funded by two compulsory levies on all schemes eligible for the Pension Protection Fund: the pension protection levy, and the administration levy.

Pension Protection Levy

The pension protection levy is used to fund the compensation payable to members of schemes where the Pension Protection Fund has assumed responsibility for the scheme. It is divided into two parts:

The scheme based levy takes account of the level of a scheme’s liabilities relating to members. If the Pension Protection Fund considers it appropriate, it may also take account of the number of members within a scheme, the total amount of pensionable earnings of active members within a scheme and/or any other scheme factor as set out in regulations.

The risk based levy must take account of the funding level of a scheme and the risk of its sponsoring employer becoming insolvent. If the Pension Protection Fund considers it appropriate, it may also take account of a scheme’s asset allocation and/or any other risk factor as set out in regulations.

Click here for more information on the pension protection levy.

Administration Levy

The administration levy pays for the initial start up costs and ongoing administrative costs of the Pension Protection Fund. Schemes pay an amount per scheme member, which varies according to the total size of the scheme.

The Department for Work and Pensions consults annually on the regulations providing for the amount payable, which is then set by statutory instrument.

The Pensions Regulator collects the administration levy on behalf of the Pension Protection Fund, and it is invoiced separately to the pension protection levy. Any queries relating to the administration levy should be raised directly with the Regulator

Recent publications about the administration levy:

Consultation on Draft Regulations: The Occupational Pension Schemes (Levies) (Amendment) Regulations 2008

The Occupational Pension Schemes (Levies) (Amendment) Regulations 2007

The Fraud Compensation Levy

The Pension Protection Fund can raise a fraud compensation levy to fund the Fraud Compensation Fund. To date this has not been necessary.