'Disappointed' PLSA calls for structural reform as part of DWP's general levy proposals

Jonathan Stapleton
clock • 3 min read

The Pensions and Lifetime Savings Association (PLSA) has expressed it is disappointed with the Department for Work and Pensions’ (DWP) general levy consultation – saying there should be no increase in the levy without structural reform.

In December, the DWP went out to consultation on plans to hike the general levy - putting forwards proposals that would see costs to schemes rising by between £49m and £54m over three years.

The levy funds The Pensions Regulator, the Pensions Ombudsman, and part of the activities of the Money and Pensions Service.

The PLSA said it was disappointed 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.

It said that 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 levy; improve transparency and provide levy payers with a greater breakdown of regulatory costs.

It said full structural review of the general levy needed to be conducted to place bounds on cross-subsidy.

The PLSA said cross-subsidy was an inevitable feature of levies and was in some cases desirable. But it felt it should be limited - noting the costs of "greater good" regulation shouldn't fall disproportionately on any one group of levy payers; that schemes should generally fund the regulation of the benefits they offer; and that the distribution of costs should be consistent with government policy for the pensions market.

It added the levy should not focus on any one market sector and should not create perverse commercial incentives.

The PLSA also called on the DWP to provide greater transparency on the general levy 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.

PLSA deputy director of policy and advocacy Joe Dabrowski 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."

Dabrowski added: "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."

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