The Pension Protection Fund aims to raise £635 million through levies in 2015/16, down from the £695 million it envisages collecting this year.

It hopes to keep the formula that determines each employer's levy the same in 2016/17 and 2017/18, and anticipates that this will see levies fall further as the numbers fed into the formula change. Confirmation of how the levy will be split between employers follows a consultation that began in May.Commenting, Joanne Shepard, a senior consultant at Towers Watson, said: "It would have been surprising if the PPF had not set out to collect less next year than this year: its plans for reaching its self-sufficiency target are ahead of schedule and even quite big changes to the levy would make little difference to its chances of getting there.

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"Indeed, employers may be disappointed that the bill they've been presented with isn't smaller: £635 million is the amount the PPF would have expected to collect with no changes to the levy rules; in that sense, this isn't really a levy cut. However, fixing the formula for three years is expected to see levies fall further as 'bad years' drop out of the period over which scheme funding levels are smoothed for levy calculations.
"'Scheme-based' levies – which reflect a scheme's size rather than its strength – are expected to fall from 8% of total levy revenues to 2%. It's welcome that the cost of cross-subsidies between employers is getting smaller, but the PPF remains committed to capping risk-based levies and clawing back the cost in this way. An entirely risk-based levy would be fairer.
"Standing back from all of the detail announced today, the big picture is that the PPF can't set levies high enough to guarantee that compensation payments will not be cut in future but is collecting far more than it thinks it will require – even after this levy reduction. It's understandable that the PPF wants a safety margin but employers would be happier about stumping up the money if there was a plan to return any funds that turn out not to be needed."