The Pensions and Lifetime Savings Association (PLSA) has said it is disappointed with the Department for Work and Pensions’ (DWP) General Levy Consultation.
Responding to the consultation on the options to increase the General Levy rates which recover funding provided by DWP, the PLSA has stated its disappointment that a number of key areas remain unaddressed including the lack of the promised full structural review and greater transparency on the current deficit and forecast costs.
To ensure the efficient allocation of costs, and to prevent unintended consequences of an increase – made vital even further given the ongoing implications of Covid-19 – the PLSA remains adamant that the most appropriate course of action for Government, before any levy increase is to work with the pensions industry to:
- Conduct a full structural review of the General Levy to place bounds on cross subsidy. Cross subsidy is an inevitable feature of levies and is in some cases desirable. But it should be limited in the following ways. Firstly the costs of “greater good” regulation shouldn’t fall disproportionately on any one group of levy payers. Secondly, schemes should generally fund the regulation of the benefits they offer. Distribution of costs should be consistent with government policy for the pensions market. It should not focus on any one market sector. It should not create perverse commercial incentives;
- provide greater transparency on the deficit and forecast costs; and
- provide levy payers with a breakdown of regulatory costs and their impacts to demonstrate greater accountability and value for money is being achieved.
The General Levy on occupational and personal pension schemes recovers the funding provided by the DWP in respect of the core activities of The Pensions Regulator (TPR), the activities of The Pensions Ombudsman and part of the activities of the Money and Pensions Service (MaPS).
This consultation sought views on the Governments proposed options for change to the structure and rates of the General Levy from April 2021, 2022 and 2023.
Joe Dabrowski, Deputy Director Policy, PLSA, said: “It’s extremely disappointing that we find ourselves in this position given that we have been asking for and promised a structural review of the general levy for several years. To be clear, the PLSA firmly believes that there should be no major increase in the General Levy without due transparency and accountability on the part of Government, and large levy increases at short notice in the current environment are not reasonable.
“The proposals will also still leave Automatic Enrolment providers paying on a per-member basis, when they currently have mass membership and low assets under management. The proposals also have no regard for the challenge of inactive small pots which we hoped to see excluded from per member calculations as an initial reform.
“Given the pressures that many schemes have felt during Covid-19, we believe 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
020 7601 1726 | [email protected]k
Steven Kennedy, PR Manager
020 7601 1737 | 07713 073024 | [email protected]