DWP consults on FCF levy from 2022/23

The Department for Work and Pensions (DWP) has launched a consultation on the future rate of the FCF levy.

So we can pay the claims we’ve already received, and the claims we’re aware of which haven’t yet been submitted, last month’s Compensation (LCF & FCF) Act paved the way for a government loan to the FCF. We need to pay back the loan from the funds raised from the annual FCF levy on all eligible defined benefit and defined contribution schemes.

The maximum levy rate is set in legislation. At the current rate, DWP modelling suggests it’d take us until the 2040s to collect enough to meet the value of the claims we now expect to receive, if all are found to be eligible.

DWP requires the loan to be paid back within 10 years, so is consulting on an increase to the levy rate to enable this. It asks for views from occupational pension scheme trustees and managers, sponsoring employers of pension schemes, and any other interested stakeholders.

The consultation closes on Friday 10 December 2021.