NAPF urges caution on PPF levy

NAPF CEO Joanne Segars has welcomed the PPF’s announcement of a long-term funding strategy, but recommended a “cautious approach” to levies.

The PPF today published its full report on how it will become self-sufficient by 2030. It says by this date its liabilities will mature while the fund will grow and the number of schemes and the risk they pose will reduce.

This means it will be difficult for the PPF to charge significant levies by 2030, creating the need for it to find alternative income to pay out compensation as it becomes due.

"Pension funds welcome the PPF's ambition to think through its long-term prospects in a transparent way," Segars says. "The key will be to find a balance between a prudent route to self-sufficiency, and an overly cautious approach that saddles firms with higher levies.

"As the PPF admits, the switch from RPI to CPI will have a great impact on its funding strategy. That must be reflected in the levies that companies have to pay.

"Also, the Government must acknowledge it is the guarantor of last resort for the PPF, should their long-term plan not be realised.

"Although the long-term view of self-sufficiency is welcome, vital short-term issues need to be addressed. The PPF is still working on reform of the risk-based levy, and it must get this right over the coming months."

The PPF's report says it aims to limit exposure to interest rate and inflation risks, and build up a reserve to protect itself against other threats, such as members living longer than expected.

To achieve these aims, the PPF says it will continue to collect the pension protection levy but aims to keep it "affordable". It will also invest those levies, along with assets of schemes transferred to it and accumulated investment returns, to create another income.

The full report can be downloaded here