Consultants Broadstone has criticised government proposals to raise the general levy on pension schemes again, saying this will ‘unfairly’ target smaller schemes.
The government is looking to raise additional funding from the industry to meet increasing regulators costs. In order to do this The Department of Work and Pensions has said its preferred course of action is to increase the annual levy rate by 4 per cent per year, while also introducing a £10,000 premium in April 2026 for schemes with less than 10,000 members.
It has said this additional ‘small scheme’ premium allows for a lower initial increase across all schemes than would otherwise be required, whilst still eliminating their funding deficit by 2030/31.
The DWP stated its desire is to to see “fewer, larger, well-run schemes” as the reasons behind the proposals, noting that across the whole pensions industry most schemes with under 10,000 members have 2-11 members and are frequently found to have lower governance standards, knowledge of pensions and low compliance levels.
However Broadstone chief actuary David Hamilton says: “The DWP’s preferred direction of travel seems to set a punitive premium trap and once again small schemes look set to be hammered disproportionately by regulatory changes.
“The proposals are evidently aiming to drive consolidation at the smaller end of the DC market, but they are poorly targeted and the figures simply do not add up.”