Ten master trusts will pay at least 25% of the total general levy despite holding just 2% of assets, according to The People’s Pension (TPP).
The levy is set by the Department for Work and Pensions (DWP) and is in place to cover the cost of running The Pensions Regulator, The Pensions Ombudsman, and part of the activities of the Money and Pensions Service.
It is calculated per pot which is "leaving master trusts footing more than their share of the bill as their memberships include millions of low earners who have small, and often multiple, pension pots due to auto-enrolment (AE)", TPP said.
The master trust's analysis looked at data from ten master trusts from itself, NEST, Now Pensions, Smart Pension, Legal & General Investment Management, Lifesight, Cheviot, Mercer, National Pension Trust, and TPT Retirement Solutions.
The analysis revealed that, by the 2020/2021 financial year, TPP - which has 4.7 million members - will alone pay nearly 7% of the total general levy as it stands, meaning it will be liable for £2.9m despite assets of just £8bn.
However, a pension fund with 450,000 members and much larger assets of £60bn would pay around £390,000, which is 0.9% of the total levy charge.
TPP director of policy Gregg McClymont, who is also Pensions and Lifetime Savings Association master trust committee chairman, said: "The general levy is no longer fit for purpose. The per member structure made sense in a world of long-term employment, where a smaller proportion of the workforce had access to workplace pension saving.
"But AE is a small pot-creation machine because it has, rightly so, brought in a new group of people with lower earnings who move from job to job more frequently. It's completely unfair that these earners carry the heaviest regulatory burden, with master trusts paying the highest cost."
In October, the DWP launched a consultation on increasing the levy to combat the shrinking surplus and rising deficit of the three bodies it funds. The consultation - which closed last week - revealed the industry is generally negative about hiking the fee.
McClymont added: "The government's latest proposals would see these already unfair costs rise exponentially, with many providers left with little choice but to pass the cost directly on to their membership.
"The burden of levy payments carried by schemes with many members but few assets is perverse."
TPP suggested one of the DWP's four proposals to raise the levy would see its bill rise by 245% over three years.
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