The government has been urged to review the General Levy framework before introducing further increases, amid warnings that the proposals could disproportionately affect large schemes, distort value for money (VFM) assessments and undermine wider consolidation objectives.

In response to the Department for Work and Pensions’ (DWP) consultation on the Occupational and Personal Pension Schemes General Levy Regulations Review 2026,Pensions UK said it recognised the need to address the General Levy deficit and ensure the long-term sustainability of the bodies it funds, including The Pensions Regulator (TPR), the Money and Pensions Service (Maps) and The Pensions Ombudsman.

However, it argued that the current framework had not kept pace with major changes in the pensions market and called for a full structural review before significant changes were made to how costs were distributed.

Pensions UK warned that higher levy costs could have consequences for member outcomes, business planning and the government’s wider policy objectives around scale, consolidation and value for money.

It added that the current per-member charging structure could disproportionately affect large defined contribution (DC) schemes serving members with smaller pension pots.

The organisation also warned that higher levy costs could feed through into future VFM assessments by worsening scheme cost metrics, even though the additional costs do not reflect inefficiency or poor governance.

It argued that this could particularly affect mass-market master trusts and create unintended distortions within the VFM framework.

It also raised concerns that the proposals could weaken incentives for consolidation at a time when the government is encouraging the market to move towards fewer, larger schemes.

Pensions UK chief executive, Julian Mund, stated: “Without greater transparency and a clear evidence base, there is a risk that further increases to the General Levy could place disproportionate costs on some schemes and savers, distort value for money assessments and cut across the government’s own objectives on consolidation and better retirement outcomes.

“The pensions market has changed significantly, particularly with the growth of defined contribution saving, master trusts, automatic enrolment and consolidation. Yet the General Levy framework has not been subject to the full structural review industry has been calling for.”

Pensions UK therefore called for the government to review what the levy funds, how costs are allocated between different scheme types and activities, and whether the current system remains fair, transparent and sustainable.

It also recommended introducing a cap on individual levy liabilities from 2027 as an interim measure while a broader review is undertaken.

The Investing and Saving Alliance (TISA) also called for stronger evidence to justify the proposed increases for master trusts and personal pension schemes.

TISA head of policy, products & long-term savings, Renny Biggins, explained: “Different pension schemes place different demands on regulators, so different levies can be justified. But significant increases need clear evidence behind them, particularly for master trusts and personal pensions, to maintain industry confidence that what they are paying is proportionate and delivers value.”

TISA also raised concerns about the timetable, with revised rates expected to take effect from April 2027.

It warned that uncertainty over the final framework could leave firms with limited time to incorporate the new costs into budgets and business plans, calling for transitional arrangements or phased implementation where increases were particularly significant.

Biggins added that additional regulatory costs could divert resources away from investment in services, products and innovation intended to improve saver outcomes.

TISA also called for greater transparency over how levy income is spent and the outcomes it delivers, alongside a framework capable of adapting to further consolidation and potential convergence between workplace and retail pensions after 2030.

Meanwhile, People’s Partnership head of policy, Tim Gosling, argued that a rethink of the General Levy is "long overdue".

"The structure of the levy means that two schemes are now paying just under a fifth of the levy, which is totally disconnected from the cost of regulation," he said.

He pointed to the Financial Conduct Authority (FCA) levy as an alternative approach, noting that it is linked to regulatory costs and charged against an organisation’s gross income rather than on a per-member basis.

“The DWP should review the levy as soon as possible and should cap the levy bills of large schemes paying far more than they cost to regulate,” Gosling added.

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