The Department for Work and Pensions (DWP) is considering a 9% increase to the general levy for master trusts and personal pension providers, according to proposals published in July. The levy funds pensions regulation and related services, and the DWP says the increase is needed to put it on a more sustainable footing.
Other defined contribution (DC) schemes would face a 6.2% increase under the plans, which were outlined as part of a consultation document. The proposed changes follow a 2026 review that identified a “structural funding gap” in levy income, according to Labour Party Minister for Pensions Torsten Bell.
Industry response: SPP backs funding but calls for fairness
Madalena Cain, deputy chair of the Society of Pension Professionals’ (SPP) DC committee, said: “The SPP fully supports steps to ensure our regulatory bodies are adequately funded in order to protect savers. However, any 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,” Cain added. The SPP also called for a single consolidated report covering the Pensions Regulator, the Pensions Ombudsman and the Money and Pensions Service, showing how levy income is allocated, what is driving costs and the value delivered for savers.
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.”
Minister cites structural funding gap and rising complexity
Bell said the 2026 review identified a “structural funding gap” in the levy system. 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,” Bell said.
Government plan sets route to surplus by 2033-34
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.”
