The government should provide stronger evidence to justify plans to increase the general levy for master trusts and personal pension providers by 9%, the Society of Pension Professionals (SPP) has said.
The Department for Work and Pensions (DWP) proposed the increase in July as part of efforts to put the levy, which funds pensions regulation and related services, on a more sustainable footing. Other defined contribution (DC) schemes would face a 6.2% increase.
The proposals have already drawn criticism from the SPP and Pensions UK, particularly over the higher rate for master trusts. The DWP said the levy has accumulated a £154m shortfall compared to the costs of overseeing the pensions industry, and it aims to stabilise the deficit by 2036.
In its formal consultation response, the SPP backed the objective of ensuring levy-funded bodies are properly resourced, but said the government had not provided enough evidence to explain why master trusts and personal pension providers should face significantly higher increases than other schemes.
“Given the huge cumulative cost of ongoing government reforms, the government must ensure levies are carefully balanced with industry affordability.”
Different levy rates could be justified where they reflected demonstrable differences in regulatory activity, the society said, but argued the consultation had not sufficiently shown that this was the case.
The SPP also warned that higher regulatory costs would ultimately be absorbed either through providers’ commercial margins or, over time, through charges paid by members.
It said the additional costs would arrive as the industry was already implementing a major programme of government-led reforms, including pensions dashboards, Value for Money assessments, small pots consolidation, decumulation reforms and wider market consolidation. Levy increases should therefore be considered alongside these costs, it argued.
Madalena Cain, deputy chair of the SPP’s DC committee, said: “The SPP fully supports steps to ensure our regulatory bodies are adequately funded in order to protect savers. However, any changes to the General Levy must be fair, proportionate, and transparent.
“Given the huge cumulative cost of ongoing government reforms, the government must ensure levies are carefully balanced with industry affordability.”
SPP calls for greater transparency
The SPP also called for a single consolidated report covering the Pensions Regulator, the Pensions Ombudsman and the Money and Pensions Service, showing how levy income is allocated, what is driving costs and the value delivered for savers.
Looking beyond 2030, it said the government should reconsider whether a purely per-member charging model remains appropriate as the pensions market consolidates. One option could be to retain per-member charging for guidance and ombudsman services, while linking regulatory costs to a measure such as assets under management.
Cain said: “Moving forward, our recommendation to introduce consolidated reporting across all levy-funded bodies would greatly help to provide the transparency and accountability pension schemes – and ultimately savers – rightly deserve.”
