Pensions Revolt - Leading Master Trust Warns Auto-Enrolment Savers Are Subsidising the Rising Costs of General Levy

PENSIONS - One of the largest auto-enrolment pension providers in the UK has warned that millions of people saving for retirement through auto-enrolment will continue to pay a disproportionate share of the rising costs of pensions regulation unless the General Levy is reformed.

This warning from The People’s Pension comes as the Government confirms a 10 per cent increase in the cost of the General Levy on Occupational and Personal Pension Schemes, which funds The Pensions Regulator, The Pensions Ombudsman and the Money and Pensions Service.

As the Levy is calculated per member, auto-enrolment master trusts – whose members are likely to have lower earnings and multiple smaller pension pots – are left paying a disproportionate share of the charge compared to the assets they hold.

Just 10 master trusts will pay 25 per cent of the total General Levy next year, despite only holding two per cent of the assets across occupational pensions².

Following the increase, The People’s Pension - with assets under management around £9bn – estimates that it will pay around £3.1 million per year, compared to the UK’s largest fund with £60bn across 429,000 members, which will be liable for only around £430,000 in levy payments.

 The People’s Pension is urging the Government to make reform of the levy a top priority with a new system in place by April 2021.

Commenting, Gregg McClymont, director of policy at The People’s Pension, said:

“While we welcome the commitment to a structural review, it can’t come quickly enough. The starting point needs to be a clear breakdown of the rising regulatory costs by pensions sector, so it's clear why the General Levy is rising.  

“The burden of levy payments carried by auto-enrolment schemes with millions of small pots is too heavy, and, as the Government's acknowledged, could leave pension providers no choice but to pass the rising regulatory costs straight through to members."

And: The Pensions and Lifetime Savings Association (PLSA) comments on the Department of Work and Pension’s response to the General Levy Consultation.

Craig Rimmer, Policy Lead for Master Trusts, PLSA said: “The Pensions and Lifetime Savings Association is deeply disappointed the Government has decided to apply, at short notice, a 10% increase to the General Levy pensions schemes pay to fund the sector’s arms-length supervisory bodies.

“However, we are pleased the Department for Work and Pensions has listened to the industry and decided to conduct a full structural review, which should result in a more efficient and more transparent application of the levy.

“One example of this inefficiency stems from a per member charging structure, which regressively hits schemes with millions of savers with the smallest pots the hardest.

“It is vital that DWP determines the principles of any new levy structure as a first step and the PLSA looks forward to gathering the expert views of the industry to inform the review.”

ABC Note: The People's Pension is a leading, not-for-profit, master trust, with nearly five million members from 90,000 employers and more than £9bn assets under management. The ten master trusts include NEST, NOW Pensions, Smart Pension, The People's Pension, LGIM, Lifesight, Cheviot, Mercer, National Pension Trust, TPT Retirement Solutions.

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