Govt withdraws plan to increase general levy on pensions

The government will not go ahead with the planned increase in the general levy on pension schemes, which was due to rise by 10 per cent on 1 April 2020.

Due to the ongoing coronavirus crisis, the government announced that it has laid an order to revoke the change in regulations.

Given the “unprecedented circumstances”, it will now focus on reviewing the structure of the levy and will engage with the industry “over the course of the next few months”.

Commenting on the withdrawal of the planned increase, Pensions Minister, Guy Opperman, said: "I understand the uncertainty businesses and employers are facing right now and that's why we've withdrawn the pension schemes levy increase.

"We want to support businesses of all sizes, and this will help to reduce the unprecedented burden they're currently facing."

The government had planned the rise following a six week Department for Work and Pensions (DWP) consultation, which confirmed a holding increase of 10 per cent of 2019 to 2020 rates on 1 April 2020, with further increases from April 2021 to be informed by a wider review of the levy.

Its withdrawal was broadly welcomed by the pension industry, which had previously expressed its disappointment at the proposed increase.

PLSA director of policy and research, Nigel Peaple, commented: “We are very pleased that the government has decided to not go ahead with a 10 per cent increase in the levy in light of the hugely challenging economic situation.

“As we said in our response to government on this issue last autumn, it is much better to do a review of the levy structure before introducing any increases. We believe any such review will be better informed if it is delayed until after the current crisis has passed.”

The general levy is used to recover funding provided by the DWP, The Pensions Regulator (TPR), The Pensions Ombudsman (TPO), and the Money and Pensions Service (Maps), with the amount levied dependent on the number of members within the individual scheme.

The levy was in a surplus by £2m in 2018, however, increases in annual expenditure means that the fund now has a cumulative deficit of over £16m in 2019, which is estimated to reach over £50m by 2020, according to DWP.

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