The Pension Protection Fund (PPF) has maintained a zero levy rate on conventional defined benefit (DB) schemes for 2027/28, marking the third consecutive year this charge will not apply. Around 4,800 schemes, which are DB schemes with a substantive sponsoring employer, will not be charged a PPF levy, affecting the PPF’s financial position and evidence-based approach to levy setting. This exemption aligns with the fund’s broader strategy of tailoring levies to risk profiles rather than applying uniform charges across all schemes.
The Alternative Covenant Scheme (ACS) levy will be paused for one year, while the PPF completes its review of the ACS methodology. The PPF aims to ensure a risk-proportionate approach that reflects ‘key developments‘, such as the final form of the government’s regulatory regime. The pause did not permanently remove the ACS levy, and any future charging decisions will be informed by market developments and the outcome of the PPF’s review. Aaron Pang, the PPF’s acting chief actuary, stated that this adjustment would help ensure the levy remains fair, practical, and responsive to changing economic factors while still safeguarding current and future members.
Separately, the PPF has finalized adjustments to actuarial assumptions for section 143 and 179 valuations, following an examination of bulk annuity pricing trends. These updates focus on refining discount rates and mortality projections to better reflect current buyout market conditions. The changes are expected to lower estimated liabilities, though the exact impact will differ between schemes. The new section 143 assumptions will take effect from 31 May 2026 and the revised section 179 assumptions will apply to valuations with an effective date on or after 30 November 2026. The PPF will release updated valuation guidance later this year, pending clarification in secondary legislation under the Pension Schemes Act 2026 regarding how pre-1997 indexation of PPF compensation should be handled.
For superfunds regulated by The Pensions Regulator, the financial and mortality assumptions used in section 179 valuations will now align with those applied to section 143 valuations. This standardization aims to improve the precision of superfund liability assessments, influencing both ACS levy calculations and default wind-up triggers. Pang stated that applying the revised assumptions to valuations with an effective date on or after 30 November 2026 will provide more certainty and avoid unnecessary disruption for valuations already in progress. For Alternative Covenant Schemes, the combination of a one-year levy pause and a more appropriate valuation approach provides a stable basis while the PPF develops the longer-term framework in consultation with stakeholders.
