DWP consultation concerning the General Levy on Occupational and Personal Pension Schemes

21 October 2019

The Department for Work and Pensions (DWP) has advised that it is conducting a consultation into the proposed increase to the General Levy imposed on Occupational and Personal Pension Schemes and is seeking the input of affected parties and members of the public. Emphasis is placed on obtaining the views of occupational pension scheme trustees, personal pension providers and sponsoring employers of pension schemes.

The consultation, which will run until 15 November 2019, addresses intentions to increase the levy rates from the turn of the new tax year, April 2020, in order to recover funding that is provided, by DWP, for activities of three of the main pension bodies. They are The Pensions Regulator (TPR), The Pensions Ombudsman (TPO) and the Money and Pensions Service (MaPS).

The proposals for the increase have been introduced as a response to recent revenue and expenditure activity of the levy. In 2013, the levy was in surplus of £24 million, which dropped significantly to two million by 2018, followed by a deficit of £16 million in 2019. It is predicted that this deficit will continue to grow, hence the proposal to introduce higher levy rates to attempt to combat this. The last time the levy rates increased was back in 2008 – 2009, and they were then decreased by 13% in 2012-2013. A new lower rate was implemented in 2017-2018 for schemes with 500,000 members and upwards.

The DWP asserts that the levy has not been updated in line with inflation, nor has it reflected the drastic changes to the pensions landscape that have occurred since 2017. Huge government initiatives have been introduced to attempt to encourage workers to invest into their pension schemes and also to persuade them to contribute at a higher rate. There are intentions to increase activity within TPR, TPO and MaPS but this obviously requires further investment, which cannot be achieved from a fund which is already in arrears. The DWP is quick to point out that these enhanced activities will only be beneficial and will positively support government objectives, pension schemes and savers.

The consultation piece offers four options to tackle this issue. They are as follows:

  • Holding increase of ten percent of 2019 to 2020 rates on 1 April 2020, further increases from April 2021 informed by a wider review of the levy
  • Phased increase in the levy over the three years commencing 1 April 2020
  • Phased increase in the levy over approximately ten years commencing 1 April 2020
  • Phased increase in levy over approximately ten years commencing 1 April 2021

As the levy amount is dictated by the number of total members within the scheme, there are incremental decreases to the sum paid on each member, so the larger the scheme, the lower the amount paid per member is. In addition to the four options stated, the DWP also proposes that occupational schemes with two to 11 members, who currently pay £29 per year, will pay £75 per year per scheme.  Personal schemes with the same membership figures will see an increase from £12 per year to £30 per year per scheme.

If you would like to input into this consultation please email [email protected].

 

 


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