The Government is consulting on changes to the General Levy for pension schemes. The Government's apparent preferred option will add a premium of £10,000 to the levy as of April 2026 for schemes with less than 10,000 members, including SSASs. This will represent a huge hike to the General Levy for SSASs, which currently pay a General Levy of less than £50. SSAS businesses may wish to respond to the consultation which runs until 11.55pm on 13 November 2023.
General Levy consultation proposes £10,000 levy hike for small schemes
The General Levy (not to be confused with the PPF levy) is used to indirectly fund the "core" activities of the Pensions Regulator, the activities of the Pensions Ombudsman and the pensions-related activities of the Money and Pensions Service. The amount levied on individual schemes is currently calculated according to the number of scheme members and the cost to a SSAS is less than £50 per year. However, a Government consultation proposes to add a £10,000 premium to the levy as of April 2026 for schemes with less than 10,000 members, including SSASs. This huge hike in the levy is designed to cover a "deficit" that has arisen due to amounts raised by the General Levy being insufficient to cover in full the costs it is designed to fund.
The consultation sets out three options:
- Option 1: Continue with the current levy recovery rates and levy structure. This option would freeze ratees at this year's rates until 2026/27. The Government states that this option would leave the deficit to continue to grow and would not meet the policy intent that the pensions industry should pay for the relevant pension bodies.
- Option 2: Retain the current levy structure and increase rates by 6.5% per year for all schemes. The Government states that this approach "does not support the policy direction".
- Option 3: Increase rates for all schemes by 4% per year and, as of April 2026, add a premium of £10,000 to schemes with memberships under 10,000. The Government comments that most schemes with under 10,000 members have 2-11 members and are frequently found in research to have lower governance standards, lower knowledge and awareness of pensions and low compliance levels. The Government states, "Introducing the premium payment in 2026 allows smaller schemes time to adapt and consolidate, giving two years to consider whether this is in their members' interests.
The consultation closes at 11.55pm on 13 November 2023.
It appears clear from the wording of the consultation that Option 3 is currently the Government's preferred option. This option would represent a huge levy increase for SSASs, which currently pay a General Levy of less than £50. The reference in the consultation to most schemes with under 10,000 members having 2-11 members shows that the impact on SSASs is no oversight on the part of the Government, but appears to be part of the Government's wider strategy of encouraging consolidation of pension schemes. There is reference in the consultation to the Government wanting pension schemes to have the necessary scale to invest across the full range of asset classes. However, there is no acknowledgement of the particular factors that may drive SSAS investments, for example that a SSAS will frequently own commercial property that is leased to the SSAS's sponsoring employer.
Given the huge impact that the proposed levy hike will have on the costs which SSASs have to meet, we expect that businesses that operate SSASs will wish to respond to the consultation. SSAS businesses may also wish to make their clients aware of the proposed levy hike and encourage them to respond to the consultation.