Search Legislation

The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2018

What Version

 Help about what version
  • Latest available (Revised)
  • Original (As made)

Opening Options

 Help about opening options

Status:

This is the original version (as it was originally made). This item of legislation is currently only available in its original format.

Statutory Instruments

2018 No. 39

Pensions

The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2018

Made

15th January 2018

Laid before Parliament

16th January 2018

Coming into force in accordance with article 1(2)

The Secretary of State for Work and Pensions makes the following Order in exercise of the powers conferred by sections 178(1) and (6) and 315(2) and (5) of, and paragraphs 26A(7) and 27(2) and (3) of Schedule 7 to, the Pensions Act 2004(1).

In accordance with section 178(5) of that Act, the Secretary of State has reviewed the general level of earnings obtaining in Great Britain during the period of 12 months ending with 31st July 2017. It appears to the Secretary of State that the general level of earnings has increased by 1.7% during that period.

On a review under section 148(2) of the Social Security Administration Act 1992(2), the Secretary of State concluded that the general level of earnings obtaining in Great Britain exceeds by 1.3% the general level at the end of the period taken into account for the last such review under that section.

Citation, commencement and interpretation

1.—(1) This Order may be cited as the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2018.

(2) It comes into force—

(a)for the purposes of this article and article 2, on 14th March 2018,

(b)for the purposes of article 3, on 31st March 2018, and

(c)for the purposes of articles 4 and 5, on 1st April 2018.

(3) In this Order, “the Act” means the Pensions Act 2004.

The earnings percentage

2.  For the purposes of section 178(3)(a) of the Act (the levy ceiling), the percentage by which it appears to the Secretary of State that the general level of earnings has increased during the review period(3) is 1.7%.

The levy ceiling

3.  For the purposes of section 177 of the Act (amounts to be raised by the pension protection levies), the levy ceiling for the financial year beginning on 1st April 2018 is £1,024,372,330.

The compensation cap

4.  The amount specified for the purposes of paragraph (a) of the definition of “the standard amount” in paragraph 26A(7) of Schedule 7 to the Act (pension compensation provisions – meaning of “the compensation cap”) is £39,006.18.

Revocation

5.  The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2017(4) is revoked.

Signed by authority of the Secretary of State for Work and Pensions.

Guy Opperman

Parliamentary Under Secretary of State

Department for Work and Pensions

15th January 2018

EXPLANATORY NOTE

(This note is not part of the Order)

This Order specifies the earnings percentage used to calculate the levy ceiling (article 2), the amount of the levy ceiling (article 3) and the standard amount of the compensation cap (article 4) for use in relation to the Pension Protection Fund in the financial year beginning on 1st April 2018.

The Board of the Pension Protection Fund (“the Board”) is established by section 107 of the Pensions Act 2004 (c. 35) (“the Act”) to provide compensation for members of certain occupational pension schemes which are under-funded at a certain level and whose sponsoring employer has become insolvent.

Section 175 of the Act requires that the Board must impose pension protection levies for each financial year. Section 177(2) provides that the amount of the levies for a financial year must not exceed the levy ceiling for that financial year. The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2017 (S.I. 2017/50) (“the 2017 Order”) specified that the levy ceiling for the financial year beginning on 1st April 2017 is £1,007,249,095. Section 178(3)(a) of the Act provides that the levy ceiling must increase in line with any increase in the general level of earnings obtaining in Great Britain.

Article 2 of this Order specifies that the increase in the general level of earnings for the period from 1st August 2016 to 31st July 2017 is 1.7%. Accordingly, article 3 specifies that the levy ceiling for the financial year beginning on 1st April 2018 is £1,024,372,330.

The compensation cap is used by the Board to determine the amount of compensation payable to a person who is under normal pension age on the assessment date (as described in paragraphs 2 and 34 of Schedule 7 to the Act) and whose compensation is not derived from a survivor’s pension or a pension payable on the grounds of ill health. The amount of compensation payable must be restricted in accordance with paragraph 26 of Schedule 7 to the Act in cases referred to in that paragraph. Where that paragraph applies, the Board uses the compensation cap to determine the amount of compensation payable.

Article 4 provides that the standard amount of the compensation cap under paragraph 26A(7)(a) of Schedule 7 to the Act is £39,006.18 from 1st April 2018. This is an increase on the previous standard amount (which was previously specified under paragraph 26(7) of Schedule 7 to the Act) to reflect a higher general level of earnings.

Article 5 revokes the 2017 Order.

This Order amends an existing regulatory regime by a pre-determined formula and the associated administrative costs or savings for the private sector and civil society organisations are negligible. A full impact assessment is not necessary for such an Order.

(1)

2004 c. 35. Paragraph 26A of Schedule 7 was inserted by paragraphs 1 and 3 of Schedule 20 to the Pensions Act 2014 (c. 19) and paragraph 27(2) of Schedule 7 was amended by paragraphs 4 and 6 of Schedule 20 to that Act. See also S.I. 2017/50 which set the levy ceiling for the financial year beginning on 1st April 2017.

(2)

1992 c. 5. Section 148(2) was amended by section 37 of the Child Support, Pensions and Social Security Act 2000 (c. 19).

(3)

See section 178(4) of the Pensions Act 2004 and regulation 3 of S.I. 2006/2692 which provide that the review period is the period of 12 months ending with 31st July 2017.

Back to top

Options/Help

Print Options

Close

Legislation is available in different versions:

Latest Available (revised):The latest available updated version of the legislation incorporating changes made by subsequent legislation and applied by our editorial team. Changes we have not yet applied to the text, can be found in the ‘Changes to Legislation’ area.

Original (As Enacted or Made):The original version of the legislation as it stood when it was enacted or made. No changes have been applied to the text.

Close

Opening Options

Different options to open legislation in order to view more content on screen at once

Close

Explanatory Memorandum

Explanatory Memorandum sets out a brief statement of the purpose of a Statutory Instrument and provides information about its policy objective and policy implications. They aim to make the Statutory Instrument accessible to readers who are not legally qualified and accompany any Statutory Instrument or Draft Statutory Instrument laid before Parliament from June 2004 onwards.

Close

More Resources

Access essential accompanying documents and information for this legislation item from this tab. Dependent on the legislation item being viewed this may include:

  • the original print PDF of the as enacted version that was used for the print copy
  • lists of changes made by and/or affecting this legislation item
  • confers power and blanket amendment details
  • all formats of all associated documents
  • correction slips
  • links to related legislation and further information resources
Close

More Resources

Use this menu to access essential accompanying documents and information for this legislation item. Dependent on the legislation item being viewed this may include:

  • the original print PDF of the as made version that was used for the print copy
  • correction slips

Click 'View More' or select 'More Resources' tab for additional information including:

  • lists of changes made by and/or affecting this legislation item
  • confers power and blanket amendment details
  • all formats of all associated documents
  • links to related legislation and further information resources