PLSA ‘disappointed’ with DWP’s general levy consultation

The Pensions and Lifetime Savings Association (PLSA) has stated that it is “disappointed” with the Department for Work and Pensions’ (DWP) consultation on restructuring the general levy.

In its response, the PLSA said that several key areas remained unaddressed, pointing to the omission of the promised full structural review and lack of greater transparency on the current deficit and forecast costs.

To ensure costs are allocated efficiently and to prevent unintended consequences of a levy increase, the association urged the government to work with the pensions industry on conducting a full structural review of the levy to place bounds on cross subsidy before any levy increase.

The PLSA suggested that cross subsidy should be limited by ensuring that the costs of ‘greater good’ regulation does not fall disproportionately on a particular group of levy payers, and that schemes generally fund the regulation of the benefits they offer.

“Distribution of costs should be consistent with government policy for the pensions market,” the organisation stated. “It should not focus on any one market sector. It should not create perverse commercial incentives.”

It also suggested the DWP works with the industry to provide greater transparency on the deficit and forecast costs, and provide levy payers with a breakdown of regulatory costs and their effects to show it is achieving greater accountability and value for money.

“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,” commented PLSA deputy director policy and advocacy, Joe Dabrowski.

“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.”

Dabrowski noted that the proposals outlined in the consultation will leave auto-enrolment providers paying the levy on a per-member basis, when they currently have large memberships but 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,” he 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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