RPSM05102050 - Technical Pages: Contributions and tax relief: Employer contributions: Pension levy

Pension Levy

[s102 FA 2005] [The Pension Protection Fund (Tax) Regulations 2006 SI 2006/575] 

Part 2 of the Pensions Act 2004 established a Pension Protection Fund and a Fraud Compensation Fund. Statutory levies - the ‘Pensions Act levies’ - paid by employers to these funds are not contributions made to a registered pension scheme and so would not normally qualify for relief under section 196 FA 2004. However regulation 21 of The Pension Protection Fund (Tax) Regulations 2006 provides that the Pensions Act levies will be deemed contributions under section 199 FA 2004 which means that tax relief will be given for payment of the Pensions Act levies by an employer. For example where a sponsoring employer pays or provides a scheme with funding for the levy payments.

The provision in regulation 21 of The Pension Protection Fund (Tax) Regulations 2006 means that any relief given to a sum paid by an employer on account of any of the Pensions Act levies will not be spread.

What are the Pensions Act levies?

The Pensions Act levies are:

• the administration levy referred to in section 117(1);
• the initial levy referred to in section 174(1) ;
• the risk-based pension protection levy referred to in section 175(1)(a) ;
• the scheme-based pension protection levy referred to in section 175(1)(b) ;
• the fraud compensation levy referred to in section 189(1); and
• a levy in respect of eligible schemes imposed by regulations made under section 209(7) (the Ombudsman for the Board of the Pension Protection Fund).

Pension levies paid in-specie

If an employer wishes to pay one or more of the pension levies with an in-specie payment then it will be for the Board of the Pension Protection Fund to decide whether they can accept a pension levy payment in this form rather than in cash. This is not a matter for HMRC. If the Board of the Pension Protection Fund is prepared to accept an in-specie payment of a pension levy then the payment will not qualify for relief unless it meets the requirements set out in RPSM05102035.