DWP rules out option 3 as it sets out general levy consultation response

Government decides to proceed with option 2, a rise of 6.5% across all scheme categories

04 March 2024 • 2 min read

The response, published today (4 March), said that, following consideration of the responses it received to its consultation on proposed changes to the structure and rates of the general levy on occupational and personal pension schemes, it had decided to proceed with option two in the consultation document.

This will lead to a rise of 6.5% in general levy across all scheme categories - something the government said aligned with the "majority of consultation responses received".

It has now laid regulations - The Occupational and Personal Pension Schemes (General Levy) (Amendment) Regulations 2024 - in both Houses of Parliament.

The government's preferred option had previously been option three - proposals that would have increased rates for all scheme types by 4% per year but added an additional premium of £10,000 for small defined contribution schemes in 2026/27.

The consultation response noted the industry had "made clear" this was not its preferred approach to remedying the general levy deficit - noting that, while some respondents agreed that consolidation was a positive move for the pensions industry, the consensus was that 2026/27 would be extremely difficult for schemes to meet the premium payment deadline.

The DWP said some 287 responses to the consultation were received. Of these it said four preferred option one (keeping the rates at the same levels as 2023/24 for the next three years); 278 preferred option two and just three responses preferred option three. Two responses disagreed with all options proposed.

Lane Clark & Peacock principal Tim Box commented: "We are pleased that the government has changed its position on how to raise the general levy in the future and has decided to go with the middle-ground option of 6.5% per annum increase for all schemes - the consultation response shows that 97% of respondents preferred this.

"We agreed with the government that keeping rates at the same levels would not deal with the general levy deficit but we are relieved that the government has decided not to pursue what was its preferred option in November 2023... That approach would have had a devastating effect on many pension schemes and could have seen consequential increased costs for members."