The MP for Gloucester, Richard Graham, has raised concerns about the unintended negative impact the Pension Protection Fund (PPF) levy can have on companies with closed defined benefit (DB) pension schemes.

In his blog focusing on the manufacturing firm Norville Group, which went into administration in early July before being bought by INSPECS Group, Graham said that the levy had played a part in its fall into administration.

“The PPF levy absorbed all Norville profits of the last few years, weakening their balance sheet and paving the way for a cash flow crisis,” wrote Graham.

“If all turns out well, we have a knight in shining armour to rescue and take this quality Gloucester business forward, but it won’t often work out like this.

“Other companies, and their jobs, and business rates contribution to the taxes that fund our services, may just disappear. The UK needs quality manufacturing to thrive.”

He urged the government and The Pensions Regulator to take “clear and proactive steps” to ensure that the PPF levy does not help push companies into administration.

Graham warned that although the levy is designed to be an insurance policy that helps protect companies, it can have the opposite effect.

In response, a PPF spokesperson said: “By law, we’re required to charge an annual levy, which is largely risk based, on eligible schemes.

"Typically the levy will be only a small part of the overall costs of running a DB scheme. To protect the most stressed schemes, we use a cap which ensures the maximum levy any scheme can be charged is 0.5 per cent of its liabilities.

“We recognise these are challenging times, so we’ve proactively taken steps to help schemes with their 2020/21 levy, including allowing longer to pay.

“Members of the DB scheme sponsored by the Norville Group Ltd can be reassured they are protected by the PPF.”

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