DWP launches public consultation on proposed changes to General Levy

On October 2, 2023, the DWP launched a public consultation on the proposed changes to the structure and rates of the General Levy on registrable occupational and personal pension schemes.

The General Levy recovers funding provided by the DWP in respect of the activities of the Pensions Regulator, the Pensions Ombudsman and the pensions-related activities of the Money and Pensions Service. They all receive grant-in-aid from the DWP, which is reimbursed by levy income.

The levy is payable by the trustees of registrable occupational and personal pension schemes and is calculated according to the number of members.

The consultation draws attention to the ongoing deficit in levy funding and seeks views on options for mitigating this over the next three tax years from 2024 to 2025 through to 2026 to 2027. The DWP is seeking the industry’s views on the three options previously agreed by ministers, the options are:

1. Continue with the current levy rates and levy structure (this sees the deficit continuing to grow, requiring greater rises later).
2. Retain the current levy structure and increase rates by 6.5 per cent per year (this brings the deficit back into a compliant level by 2031).
3. Increase rates by 4 per cent per year and signal an additional premium rate for small schemes (with memberships up to 10,000) from 2026 (this allows for a lower initial increase across all schemes, while still paying off the deficit, and supports consolidation of small schemes).

Some commentators have noted that option three would unfairly penalise the very significant number of smaller schemes and could accelerate moves towards consolidation. The consultation runs until November 13, 2023, and responses must reach DWP by 11.55pm on that date, as any replies received after this may not be considered.