The People’s Pension is warning that pensions regulation is unfairly subsidised by master trusts (multi-employer pension providers) and their members, as new analysis shows that going forward 10 master trusts will pay at least 25 per cent of the total General Levy, despite only holding two per cent of assets.
The General Levy on occupational and personal pension schemes recovers the funding provided by the Department for Work and Pensions ( DWP ) for The Pensions Regulator, The Pensions Ombudsman and the Money and Pensions Service. It is calculated per pot leaving master trusts footing more than their share of the bill as their memberships include millions of low earners who have small, and often multiple, pension pots due to auto-enrolment.
By 2020-21, one of the UK’s largest master trusts, The People’s Pension, would alone pay nearly 7 per cent of the total general levy as it is currently calculated despite assets of just GBP8 billion. Compare what The People’s Pension pays versus the largest pension fund in the UK; On assets of GBP60 billion and with 450,000 members, the largest fund would pay around GBP390,000. The People’s Pension with its membership and much lower assets under management, would be liable for GBP2.9 million.
At a time when the Government is proposing further increases to the General Levy – with one option which would see The People’s Pension’s bill rise by 245 per cent over three years – master trusts are questioning why their membership, with lower earnings and small pension pots carry the heaviest levy burden.
Gregg McClymont (pictured), director of policy at The People’s Pension and chair of the master trust committee at the PLSA, says: “The General Levy is no longer fit for purpose. The per member structure made sense in a world of long-term employment, where a smaller proportion of the workforce had access to workplace pension saving. But auto-enrolment is a small pot-creation machine, because it’s, rightfully, brought in a new group of people with lower earnings who move from job to job much more frequently. It’s completely unfair that these savers carry the heaviest regulatory burden, with master trusts paying the highest cost.
“The Government’s latest proposals would see these already unfair costs rise exponentially, with many providers left with little choice but to pass the cost directly on to their membership.
“The burden of levy payments carried by schemes with many members but few assets is perverse. We’re calling for an immediate review of the structure of the Levy and believe that for transparency purposes the Government should provide a breakdown of regulatory costs by pensions sector.”