The Pension Protection Fund (PPF) has confirmed that the levy on conventional defined benefit (DB) schemes under its protection will remain at zero for 2027/28, while the Alternative Covenant Scheme (ACS) levy will be paused for one year.

This is the third year in a row that conventional schemes, which are DB schemes with a substantive sponsoring employer, will not be charged a PPF levy, affecting around 4,800 schemes.

The PPF said that pausing the ACS levy for a year would give the pensions lifeboat time to complete its review of the ACS methodology, aiming to ensure a risk-proportionate approach that reflects ‘key developments’, such as the final form of the government’s regulatory regime.

It stressed that 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.

“Not imposing a levy for conventional DB schemes reflects the PPF’s financial position and evidence-based approach to levy setting,” said PPF acting chief actuary, Aaron Pang.

“Pausing the ACS levy will allow us to refine the long-term framework for Alternative Covenant Schemes, ensuring it remains risk-proportionate, practical and responsive to market developments while continuing to protect our current and future members.”

The PPF also published its response to the consultation on updated actuarial assumptions for section 143 and 179 valuations, which was launched following a review of bulk annuity market pricing.

The primary changes related to discount rates and mortality assumptions to keep them aligned with current buyout pricing.

They are expected to reduce estimated liabilities under the valuation bases, although the impact will vary by scheme.

The PPF said it would implement the proposed assumptions for sections 143 and 179, with a revised effective date for section 179 valuations.

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.

Updated valuation guidance will be published by the PPF later this year, following the publication of secondary legislation relating to the Pension Schemes Act 2026, which will detail the date from which section 143, section 179, and similar valuations should include pre-1997 indexation of PPF compensation and how this indexation should be allowed for.

The updated guidance for section 179 assumptions will also specify that, for superfunds assessed by The Pensions Regulator, the financial and mortality assumptions used for section 179 valuations will be those in force for section 143 valuations at the time, aiming to produce a more accurate assessment of liabilities.

This will be relevant to both ACS levy calculations and the default superfund wind-up trigger.

The PPF acknowledged feedback on the purpose and relevance of section 179 valuations, especially while the conventional levy remained at zero, and said it was mindful of the associated costs.

It stated that section 179 valuations remained important beyond calculating the conventional PPF levy, as they are a legislative requirement and provide a consistent measure of funding across the DB landscape, support the PPF’s risk assessment and modelling, and inform publications.

The PPF also acknowledged feedback around proportionality and said it would keep it under review.

“We have listened carefully to the points raised by respondents to the consultation, particularly around timing for section 179 valuations,” Pang stated.

“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 we develop the longer-term framework in consultation with stakeholders.

“Aligning the relevant section 179 assumptions with the section 143 basis will also support a more accurate assessment of superfund liabilities.”

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