Pensions Act 2004

175 Pension protection levies E+W+S

[F1 (1) For each financial year, the Board—

(a) may impose a risk-based pension protection levy in respect of a description of eligible scheme (or in respect of all eligible schemes), and

(b) if it does so, may also impose a scheme-based pension protection levy in respect of the same or a different description of eligible scheme (or in respect of all eligible schemes).

In this Chapter “pension protection levy” means a levy imposed in accordance with this section.]

(2) For the purposes of this section—

(a) a risk-based pension protection levy is a levy assessed by reference to—

(i) the difference between the value of a scheme’s assets (disregarding any assets representing the value of any rights in respect of money purchase benefits under the scheme rules) and the amount of its protected liabilities,

(ii) except in relation to any prescribed scheme or scheme of a prescribed description, the likelihood of an insolvency event occurring in relation to the employer in relation to a scheme, and

(iii) if the Board considers it appropriate, one or more other risk factors mentioned in subsection (3), and

(b) a scheme-based pension protection levy is a levy assessed by reference to—

(i) the amount of a scheme’s liabilities to or in respect of members (other than liabilities in respect of money purchase benefits), and

(ii) if the Board considers it appropriate, one or more other scheme factors mentioned in subsection (4).

(3) The other risk factors referred to in subsection (2)(a)(iii) are factors which the Board considers indicate one or more of the following—

(a) the risks associated with the nature of a scheme’s investments when compared with the nature of its liabilities;

[F2 (aa) the risks associated with a description of scheme which the Board considers is not supported by a substantive employer covenant;]

(b) such other matters as may be prescribed.

(4) The other scheme factors referred to in subsection (2)(b)(ii) are—

(a) the number of persons who are members, or fall within any description of member, of a scheme;

(b) the total annual amount of pensionable earnings of active members of a scheme;

(c) such other factors as may be prescribed.

(5) The Board must, before the beginning of each financial year [F3 for which it decides to impose the pension protection levies (or one of them)], determine in respect of that year—

(a) the factors by reference to which the pension protection levies are to be assessed,

(b) the time or times by reference to which those factors are to be assessed,

(c) the rate of the levies, and

(d) the time or times during the year when the levies, or any instalment of levy, becomes payable.

(6) Different risk factors, scheme factors or rates may be determined in respect of different descriptions of scheme.

F4 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F5 (7A) For the purposes of subsection (3)(aa), a scheme is “not supported by a substantive employer covenant” if, based on the financial position of the employer, there is no realistic prospect of the employer being able to provide the trustees or managers with material financial support for the purpose of satisfying liabilities of the scheme.

For that purpose the employer’s “financial position” means its financial position ignoring—

(a) any capital buffer (within the meaning of Part 3 of the Pension Schemes Act 2026), and

(b) any financial support which it may obtain from another person but to which it is not entitled.]

(8) In this section—

• F6 ...

• “pensionable earnings”, in relation to an active member under a scheme, means the earnings by reference to which a member’s entitlement to benefits would be calculated under the scheme rules if he ceased to be an active member at the time by reference to which the factor within subsection (4)(b) is to be assessed.

(9) In this section and sections 176 to 181 “financial year” means a period of 12 months ending with 31st March.

(10) The Board’s [F7 power] to impose pension protection levies in respect of any financial year is subject to—

(a) section 177 (amounts to be raised by the pension protection levies), F8 ...

F8 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 S. 175(1) substituted (29.6.2026) by Pension Schemes Act 2026 (c. 22), ss. 123(5)(a), 133(11)(b); S.I. 2026/669, reg. 2

F2 S. 175(3)(aa) inserted (29.6.2026) by Pension Schemes Act 2026 (c. 22), ss. 123(5)(b), 133(11)(b); S.I. 2026/669, reg. 2

F3 Words in s. 175(5) inserted (29.6.2026) by Pension Schemes Act 2026 (c. 22), ss. 123(5)(c), 133(11)(b); S.I. 2026/669, reg. 2

F4 S. 175(7) omitted (29.6.2026) by virtue of Pension Schemes Act 2026 (c. 22), ss. 123(5)(d), 133(11)(b); S.I. 2026/669, reg. 2

F5 S. 175(7A) inserted (29.6.2026) by Pension Schemes Act 2026 (c. 22), ss. 123(5)(e), 133(11)(b); S.I. 2026/669, reg. 2

F6 Words in s. 175(8) omitted (29.6.2026) by virtue of Pension Schemes Act 2026 (c. 22), ss. 123(5)(f), 133(11)(b); S.I. 2026/669, reg. 2

F7 Word in s. 175(10) substituted (29.6.2026) by Pension Schemes Act 2026 (c. 22), ss. 123(5)(g)(i), 133(11)(b); S.I. 2026/669, reg. 2

F8 S. 175(10)(b) and word omitted (29.6.2026) by virtue of Pension Schemes Act 2026 (c. 22), ss. 123(5)(g)(ii), 133(11)(b); S.I. 2026/669, reg. 2

Modifications etc. (not altering text)

C1 Pt. 2 modified in part (9.3.2005 for specified purposes, 1.4.2005 for specified purposes, 6.4.2005 in so far as not already in force (except ch. 4)) by The Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 (S.I. 2005/441), regs. 1, 2-60, 71, 72

C2 Pt. 2 modified (8.3.2005 for specified purposes, 6.4.2005 in so far as not already in force) by The Pension Protection Fund (Partially Guaranteed Schemes) (Modification) Regulations 2005 (S.I. 2005/277), regs. 1(1), 2-11

C3 Ss. 175-181 modified (9.3.2005 for specified purposes, 1.4.2005 for specified purposes, 6.4.2005 for specified purposes in so far as not already in force) by The Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 (S.I. 2005/441), regs. 1, 73-75

C4 S. 175 modified (with application in accordance with reg. 3(1) of the amending S.I.) by The Occupational Pension Schemes (Pension Protection Levies) (Transitional Period and Modification for Multi-employer Schemes) Regulations 2006 (S.I. 2006/566), regs. 1(1), 3(2)(a)

C5 S. 175 modified (with application in accordance with reg. 4(1) of the amending S.I.) by The Occupational Pension Schemes (Pension Protection Levies) (Transitional Period and Modification for Multi-employer Schemes) Regulations 2006 (S.I. 2006/566), regs. 1(1), 4

C6 S. 175 modified (with application in accordance with reg. 5(1) of the amending S.I.) by The Occupational Pension Schemes (Pension Protection Levies) (Transitional Period and Modification for Multi-employer Schemes) Regulations 2006 (S.I. 2006/566), regs. 1(1), 5

Commencement Information

I1 S. 175 in force at 20.6.2005 for specified purposes (in so far as it relates to a consultation by the Board under section 176 of the Act (supplementary provisions about pension protection levies)) by S.I. 2005/1436, art. 2(2)(b)

I2 S. 175(2)(a)(i)(iii)(3)(a) in force at 6.4.2005 by S.I. 2005/275, art. 2(7), Sch. Pt. 7

I3 S. 175(1)(2)(a)(ii)(b)(3)(b)(4)(a)(b)(5)-(10) in force at 9.12.2005 in so far as not already in force by S.I. 2005/3331, art. 2(2), Sch. Pt. 2