The Pension and Lifetime Savings Association (PLSA) has called for a full review of the General Levy on pension schemes – to ensure that schemes are not hit by unfair and sharply rising costs.
The General Levy is collected by the Department for Work & Pensions (DWP) to fund bodies vital to the supervision of the industry including the Pensions Regulator, the Pensions Ombudsman and the pensions guidance elements of the Money and Pensions Service.
The PLSA is a strong supporter of good, proportionate regulation that results in well-run schemes and appropriate member protection.
However, the options under consideration in DWP’s consultation paper on the General Levy – the worst of which calls for a 45% increase in the levy in 2020 and a further hike of 245% in 2023– cause significant concern.
The extent of the increase, the short notice given ahead of an increase from next year, the lack of transparency about how the deficit has built up and how costs are apportioned were highlighted in the PLSA’s response to the consultation as areas of concern.
What is also unclear is how the new and additional costs would be shared. There is a risk that the increased levy as proposed, would create a disproportionate effect on some types of scheme.
What is clear is that significant additional levy costs will divert funds that schemes could be using for services to their members at a time when regulatory burdens are growing.
To ensure the efficient allocation of costs and to prevent unintended consequences of the increase, the PLSA proposes the most appropriate course of action is for Government to work with the pensions industry to:
• conduct a structural review of the General Levy and the Fraud Compensation Levy;
• provide greater transparency on the deficit and forecast costs; and
• develop greater accountability on costs and impacts.
Nigel Peaple, Director of Policy & Research, PLSA said: “There should be no major increase without due transparency and accountability on the part of Government. We have to question the planning and cost management that has resulted in DWP asking for a triple digit increase in the General Levy. This is very disappointing given the high standards of transparency and governance the very same regulatory bodies it manages demand from pension schemes.
“The pensions industry accepts there have been changes in the regulatory landscape. However, it is not clear how the impact of these changes on the levy, levy payers, and their scheme members have been assessed; nor do we have a broader cost-benefit analysis of how this improves member outcomes.
“The most appropriate way forward now is to freeze the levy at current levels until such time as a full and thorough structural review of the General Levy can be conducted to ensure schemes are not hit by unfair or sharply rising costs.”
Mark Smith, Senior PR Manager
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Steven Kennedy, PR Manager
020 7601 1737 | 07713 073024 | [email protected]