The Pension Protection Fund (PPF) have said that they will not increase the level of the levy during 2013/14, which has drawn a sigh of relief from the many businesses that pay into it.
The Pension Protection Fund is set up so that employers who have guaranteed pensions for their employees do not have to let them down if they go bust. By making annual payments to the PPF, a business is able to guarantee that even if it goes bankrupt, employees will still receive their pensions. This is obviously a big help for the employees and means that the word of the business is that much better.
However, the current economic difficulties, particular the lower value of stocks and shares, has meant that pension funds have had difficulty paying out the agreed amounts. This means that the PPF has had to step in and make up the difference in multiple instances, far more than they would normally expect. This, of course, has meant that the PPF’s costs have gone up, which has, in turn, meant that they needed to increase the levy they took from businesses by £80million, to a total of £630million.
Businesses were worried that this would increase again next year, and the PPF has said that due to the ongoing difficulties, an increase would be their preferred option. However, they have now decided against another rise in their levy and will instead freeze it at £630million for the coming year. Although they could do with the extra funds, they do not want to put an extra squeeze on businesses which, in many cases, are already struggling.
The PPF have also said that the current level of £630million is only temporary and will be reduced once they are able to do so without risking the guaranteed payment of pensions.