The Pension Protection Fund (PPF) was established in 2005 and the risk based element of the PPF levy was first introduced in 2006 (to sit alongside the scheme based element of the levy). At present, the risk based levy takes into account the pension scheme’s funding (when compared to PPF levels of compensation) and the sponsoring employers’ insolvency risk (based on a “failure score” calculated by D&B). Ever since the introduction of the risk based element, the PPF levy has given many employers a significant headache and many simply regard it as another tax. Employers’ affection for the PPF levy was not helped when, in 2008, the levy scaling factor was suddenly and substantially increased leading to a dramatic rise in the levy for most pension schemes.  

This widely held ill-feeling has led to many employers taking steps to reduce their pension schemes’ levies. The best way to achieve this is for employers to take action in advance of the annual levy determination, for example, by increasing the scheme’s funding level, improving the employers’ failure score or by putting contingent assets in place. However, employers are now becoming more inclined to challenge the calculation of the levy after the levy invoice has been received. This can be done in one of two ways: by the pension scheme trustees appealing the calculation to the PPF or by the employer appealing the failure score to D&B.  


If the trustees of a pension scheme believe the PPF levy has been calculated incorrectly, they can raise this with the PPF within 28 days of the date of the invoice. If there is an obvious error that is accepted by the PPF, this route will usually be successful without the trustees having to invoke the formal appeals process. If, however, the PPF does not accept the trustees’ arguments, the trustees will need to apply for a formal review.  

The first stage of the formal review process is for the PPF to issue a “Review Decision” which can then be appealed to the “Reconsideration Committee”. In turn, the Reconsideration Committee’s decision can be appealed to the PPF Ombudsman and a determination of the PPF Ombudsman can be appealed to the High Court on a point of law.  

Although many trustees may be tempted to do so, there is little point in using this appeals process in order to express general frustration about the magnitude of the PPF levy or the manner in which it is calculated. However, it can be a useful tool where the particular circumstances of the pension scheme or its sponsoring employers do not fall squarely within the general framework for the calculation of the levy. For instance, we are currently assisting a “not for profit” organisation to challenge the levy on the grounds that the PPF has assessed different elements of the organisation separately (giving rise to less favourable failure scores) whereas, in fact, all funding is derived from the central office (which has a much healthier failure score).


If an employer believes its failure score has been incorrectly calculated, the PPF will not generally get involved, instead insisting that the matter is taken up with D&B. Indeed, as the PPF do not regard the failure score as a “reviewable matter”, according to the PPF it is not possible for a challenge against the failure score to be appealed to the PPF Ombudsman.  

As such, the only formal course of action open to an employer in this situation is to follow the internal D&B appeals procedure. This procedure consists of some five stages: starting with a customer services review and ending with a director review. In practice, it would generally seem that an employer must take its appeal to the second or third stage before D&B are likely to make any changes to the failure score. Appeals against the failure score must be brought within 28 days of the date of the levy invoice.  

Consequently, if the PPF’s view is correct, the only avenue open to an employer to bring an independently reviewed challenge to the D&B failure score would be by way of judicial review in the High Court. This is a costly and complex procedure aimed at preventing an arbitrary exercise of power by a public or quasi public body.  

A significant difficulty encountered by our clients in appealing the failure score is the lack of disclosure of relevant information by D&B. Although D&B’s research might highlight a particular issue that has an adverse impact on the failure score, it can prove very difficult for an employer to obtain any details about that issue in order to verify that the D&B research is accurate. It is, however, worth pursuing this point with D&B because, as we have seen with our clients, D&B’s research does not always turn out to be entirely accurate.  

As D&B is simply providing a service to the PPF, it has struck several of our clients as a little odd that there is no formal method by which they can bring disputes with D&B under the PPF’s appeals process. That said, we have seen the PPF involve itself with the calculation of the failure score where there has been an obvious injustice. For instance, where reference had been made by D&B to incomplete accounts during a company reorganisation that ultimately produced revised accounts indicating a strong financial position.