The Department for Work and Pensions (DWP) has been issued with a demand as it proposes an increase to the general levy for master trusts and personal pension providers of 9%. Other defined contribution (DC) schemes face a hike of 6.2%.
Government's proposed changes
Officials say the proposed option is "baseline increases with phased equalisation" applying an increase of 5% per year over a three-year period from 2027 to 2028 for DB schemes. The Government says its approach is "balanced" and restores "levy sustainability while managing impacts on schemes".
Minister for Pensions, Torsten Bell, said a 2026 review identified a "structural funding gap". He added: "Levy income has not kept pace with the cost of these functions, leading to persistent annual deficits and a growing levy debt. At the same time, the pensions landscape is changing quickly. Consolidation, the continued shift to defined contribution provision, and reforms under the Pension Schemes Act 2026 are increasing both the scale and complexity of what the system needs to deliver."
Industry response
The Society of Pension Professionals (SPP) has said the Government needs to "provide stronger evidence to justify" the plan. Madalena Cain, deputy chair of the SPP’s DC committee, told Pensions Expert that her organisation supports steps to make sure regulatory bodies have enough money to protect savers. But she added changes to the General Levy "must be fair, proportionate, and transparent".
“Given the huge cumulative cost of ongoing government reforms, the Government must ensure levies are carefully balanced with industry affordability," Ms Cain said. “Moving forward, our recommendation to introduce consolidated reporting across all levy-funded bodies would greatly help to provide the transparency and accountability pension schemes – and ultimately savers – rightly deserve," she added.
Financial projections
Officials say the Government's plan "sets a clear route to balancing levy income and expenditure before beginning to reduce levy debt; ensures all schemes contribute through a consistent baseline increase; introduces additional increases for DC, master trust and personal pension schemes to support a fairer distribution of costs over time; and phases changes to avoid sharp, one-off increases".
"Under this approach, the levy is projected to return to in-year surplus over the medium term, reaching a positive position of around £3.3 million by 2033 to 2034," the DWP added. "This marks a turning point from debt accumulation to active repayment, enabling the department to begin reducing the debt on its balance sheet over time. The trajectory has been designed to balance affordability for schemes with the need to restore fiscal sustainability, avoiding sharp increases while still delivering a clear path to recovery."
The Express contacted the DWP for comment.
