The Pension Protection Fund (PPF) is looking to remove the 25% limit on levy increases in a bid to allow it to substantially reduce charges to schemes.
The lifeboat fund's strategic plan for 2022-2025 - published yesterday (31 March) - said it would look to reduce how much levy it collected, in keeping with its long stated intention.
As part of this, it said it would "identify where legislative change would be helpful to give us more flexibility in charging the levy in the future".
WTW head of PPF consulting Joanne Shepard said it looked as though the PPF was preparing to lobby for a change to the law which prevents it from raising the ‘levy estimate' by more than 25% in a single year.
Shepard said the law - s177(5) of the Pensions Act 2004 - was originally put in place to protect schemes from steep increases in their levy payments but noted this rule was now more likely to act as a block to cutting the levy.
She explained: "In current conditions, when the PPF is well-funded and thinks it has a 95% chance of hitting its self-sufficiency goal by 2030 but is still worried about what might lie around the corner, the law is more likely to act as a brake on levy cuts.
"The government has the power to increase the 25% number but removing the restriction altogether would require primary legislation; that would be necessary if the PPF ever wanted to waive levies altogether for a year (or more) and still be able allowed to charge levies in future."
A PPF spokesperson said: "Our plans for the next three years look to build on the strong foundations already established, and make a positive difference to members, levy payers and the communities we work in.
"The current legislative framework, set in 2004, protects levy payers from significant increases in our levy collection year-on-year. As part of our funding strategy review, we expect to identify several areas where legislative change would be useful to give us more flexibility on the levy in the future.
"The 25% limit is one example where some modification could be appropriate if levy were to fall in the future, allowing decreases without damaging the ability of the levy to provide an important source of funding if needed. We will work with the Department for Work and Pensions on this."
