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The general levy from April 2024

The general levy from April 2024

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Volume 2024 | Issue 07

Download this FYI as a printable PDF

The DWP has published the government response to the consultation it conducted last year on the general levy rates to apply over the next three years.

It has decided to retain the current levy structure and increase rates by 6.5% per year. (The DWP’s preferred option of increasing rates by 4% per year with an additional premium of £10,000 for DC schemes with up to 10,000 members proved very unpopular and prompted a change in the government’s plans.)

What is the general levy?

The general levy recovers the DWP’s funding for some or all of the activities of The Pensions Regulator, The Pensions Ombudsman and the Money and Pensions Service (MaPS). It is payable by all registered pension schemes with more than one member. The levy is collected each year by the Regulator on the DWP’s behalf.

Different rates apply to defined benefit schemes, personal pension schemes, master trusts and defined contribution schemes other than master trusts.

The amount payable is based on the number of active, deferred, pensioners and pension credit members in the scheme, but subject to a minimum charge. Neither life assurance only members or dependants with a pension in payment are included. The membership data that pension schemes submit to the Regulator in their Scheme Return is therefore reflected in the levy invoice. (The levy year is aligned with the financial year, running from 1 April to 31 March.)

The consultation

The DWP reviews the rates of the general levy annually. The reason for the consultation was to seek feedback on proposals to increase the levy, due to a growing deficit in the levy fund.

Our FYI dated 12 October 2023 (The future of the General Levy) explains the options proposed by the DWP. In short, the DWP proposed no change to the levy rates (Option 1 – which was never likely to be a viable option bearing in mind the levy deficit), retaining the current levy structure and increasing rates by 6.5% (Option 2), or a smaller increase but with an additional  “premium” to be paid by what the DWP referred to as “small” schemes (Option 3).

Responses to the consultation

There were 287 responses to the consultation. The most popular option was Option 2, with the DWP’s preferred option being favoured by only three respondents and Option 1 being favoured by four respondents.

Option 2 was felt to be most appropriate for a number of reasons, including:

  • the need to remedy the deficit through increased levy rates;
  • it was the fairest for ‘all schemes’, whilst also addressing the shortfall in a sustainable way;
  • it was the easiest option to understand with a straight increase giving clarity on payments.

The revised levy rates

Regulations have been laid before Parliament to provide for the revised levy rates, effective from 1 April 2024.

Occupational schemes: DB and hybrid

Number of members in scheme 2024/25 2025/26 2026/27
Rate Minimum payment per scheme Rate Minimum payment per scheme Rate Minimum payment per scheme
2 – 11 £68 £73 £77
12 – 99 £6.75 N/A £7.19 N/A £7.66 N/A
100 – 999 £4.88 £669 £5.19 £712 £5.53 £759
1,000 – 4,999 £3.79 £4,876 £4.04 £5,185 £4.30 £5,525
5,000 – 9,999 £2.89 £18,947 £3.07 £20,196 £3.27 £21,496
10,000 – 499,999 £2.01 £28,898 £2.14 £30,697 £2.28 £32,697
500,000 + £1.52 £1,004,998 £1.62 £1,069,998 £1.73 £1,139,998

Occupational schemes: DC

Number of members in scheme 2024/25 2025/26 2026/27
Rate Minimum payment per scheme Rate Minimum payment per scheme Rate Minimum payment per scheme
2 – 11 £47 £50 £53
12 – 99 £4.60 N/A £4.90 N/A £5.22 N/A
100 – 999 £3.32 £456 £3.54 £486 £3.77 £517
1,000 – 4,999 £2.59 £3,317 £2.76 £3,537 £2.94 £3,767
5,000 – 9,999 £1.97 £12,948 £2.10 £13,798 £2.23 £14,698
10,000 – 499,999 £1.37 £19,699 £1.46 £20,998 £1.56 £22,298
500,000 + £1.04 £684,999 £1.11 £729,999 £1.18 £779,999

Master Trusts

Number of members in scheme 2024/25 2025/26 2026/27
Rate Minimum payment
per scheme
Rate Minimum payment per scheme Rate Minimum payment per scheme
2 – 11 £34 £36 £39
12 – 99 £3.34 N/A £3.56 N/A £3.79 N/A
100 – 999 £2.42 £331 £2.57 £353 £2.74 £376
1,000 – 4,999 £1.89 £2,418 £2.01 £2,568 £2.14 £2,738
5,000 – 9,999 £1.43 £9,449 £1.52 £10,048 £1.62 £10,698
10,000 – 499,999 £1.00 £14,299 £1.07 £15,199 £1.14 £16,199
500,000 + £0.76 £499,999 £0.81 £534,999 £0.86 £569,999

Personal pension schemes

Number of members in scheme 2024/25 2025/26 2026/27
Rate Minimum payment
per scheme
Rate Minimum payment per scheme Rate Minimum payment per scheme
2 – 11 £15 £16 £17
12 – 99 £1.33 N/A £1.42 N/A £1.51 N/A
100 – 999 £0.94 £132 £1.00 £141 £1.06 £150
1,000 – 4,999 £0.80 £940 £0.85 £999 £0.91 £1,059
5,000 – 9,999 £0.53 £4,000 £0.57 £4,250 £0.60 £4,550
10,000 – 499,999 £0.40 £5,300 £0.43 £5,700 £0.46 £6,000
500,000 + £0.30 £200,000 £0.32 £215,000 £0.34 £230,000

Comment

The news that the DWP has decided to proceed with Option 2, rather than its previously preferred method of dealing with the levy deficit – which would have penalised more smaller pension schemes – will be welcomed.

Interestingly, the consultation response makes it very clear that the small schemes targeted by the £10,000 premium were DC schemes – something that wasn’t explicit in the DWP’s consultation.

The general levy is not, however, an appropriate way of furthering the DWP’s DC consolidation agenda, and is something that the DWP seems to have accepted.