The Pensions and Lifetime Savings Association (PLSA) has called for a “full and thorough” review of the general levy, in response the Department for Work and Pensions (DWP) consultation paper.

The general levy is used to recover funding provided by the DWP, The Pensions Regulator (TPR), The Pensions Ombudsman (TPO), and the Money and Pensions Service (Maps), with the amount levied dependent on the number of members within the individual scheme.

The DWP’s consultation paper, published on 5 November, outlines plans for a 45 per cent increase to the levy in 2020, followed by a further increase of 245 per cent in 2023, a move which the PLSA have described as a “significant concern”.

The PLSA have cited the “extent of the increase, the short notice” and “the lack of transparency about how the deficit has built up and how costs are apportioned” as key areas of concern in their consultation response.

The levy rates were reduced by 13 per cent in 2012/13, and have remained at this level for most pension schemes since then, though a lower levy rate for schemes of 500,000 members or more was introduced in 2017/18.

While the levy was in a surplus by £2m in 2018, increases in annual expenditure means that the fund now has a cumulative deficit of over £16m in 2019, which is estimated to reach over £50m by 2020, according to DWP.

PLSA director of policy & research, Nigel Peaple, 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.”

In its consultation paper, DWP acknowledged that there are “external factors that may affect these projections over time” and has committed to adjusting any estimates as part of “continuing yearly reviews”.

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