Joint Committee on Statutory Instruments Sixteenth Report


Memorandum by the Department of Social Security


  1. The Committee has requested a Memorandum on the following point:

    "Regulation 3(2), in amending the amounts of general levy for personal pension schemes (as set out in Part II of the Schedule to the 1997 Regulations), provides for increases substantially in excess of inflation. Explain the reason(s) for these increases."

  2. Overall, the objective in setting the general levy for 2000-2001 has been with a view to recovering £13,429,000 (about £2 million from personal pension schemes and the balance from occupational pension schemes), that being the total anticipated expenditure of £14,585,000 in that year (in connection with the Registrar of Occupational and Personal Pension Schemes, the Pensions Ombudsman, the Occupational Pensions Advisory Service and the Occupational Pensions Regulatory Authority ("OPRA")), less an anticipated surplus of £1,156,000 to be carried forward from 1999-2000. The surplus is anticipated because the total receipts for the general levy in 1999-2000 have been higher than was originally expected, and because expenditure incurred in connection with the above bodies in that year is now expected to have been lower than was estimated at the time the general levy was set for that year.

  3. In 1999-2000, the general levy rates for personal pension schemes remained unchanged from those in force for 1998-99. However, the Welfare Reform and Pensions Act 1999 confers on OPRA additional responsibilities which will lead to the Authority incurring, from 2000-2001, new expenditure in connection with the regulation of personal pension schemes. These additional responsibilities are, in particular -

    (a)  the monitoring of employers' payments of contributions into personal pension schemes (by virtue of section 9 of that Act), which will lead to OPRA incurring additional costs exclusively in respect of personal pension schemes; and

    (b)  the registration and regulation of stakeholder pension schemes (by virtue of Schedule 1 to that Act) which, although they may take the form of either occupational pension schemes or personal pension schemes, are expected in most cases to comprise the latter rather than the former.

  4. When distributing the increase in the general levy which is necessary to meet the amounts referred to above between schemes of varying sizes, attention has been paid to two further factors in particular: first a request by the pensions industry to make the system of calculation and collection as simple as possible by using multiples of 5p; and second to reflect anticipated differences in relative expenditure, from the resources of the organisations funded from the general levy, as between schemes of different sizes.

  5. The combination of all of these considerations has, as the Committee has observed, led to increases in the levy for personal pension schemes for 2000-2001 which are substantially in excess of the rate of inflation.

4th April 2000

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