Proposals to charge pension schemes a £10,000 levy could bring an end to the existence of small self-administered schemes, with providers urging the government to reconsider.
Ssas providers have criticised the Department for Work and Pensions and have asked it to exclude these schemes from its levy proposals.
Earlier this month the DWP proposed changes to the levy on occupational and personal pension schemes.
As part of its proposal it set out three different options as to how it could collect the levy and at what level.
The first option is to continue with the current levy rates and levy structure and the second looks to keep the current levy structure but increase rates by 6.5 per cent each year.
But it was the third option which caught the attention of Ssas providers.
This looks to increase rates by 4 per cent each year and have an additional premium rate of £10,000 for small schemes (with membership up to 10,000) from 2026.
This would have impact Ssas, whose membership is generally limited to no more than 11 members.
When questioned whether Ssas were included in this, the DWP told FTAdviser: “The consultation is still ongoing and the DWP will respond formally to the findings in due course.”
FTAdviser spoke to several providers about what this could mean for the industry:
Catastrophic outcomes
Stephen McPhillips, technical sales director at Dentons, said the proposals were “truly shocking” and its impact on Ssas members and the industry as a whole could be “catastrophic”.
Likewise Nathan Bridgeman, director at SeaBridge Ssas, said the unintended consequences were “unthinkable”.
“Clients will pay more and get less value and poorer outcomes if this proposal goes ahead.”
Others, such as Andrew Tully, technical services director at Nucleus, believe asking a scheme with two members to pay the same £10,000 premium as a scheme with 9,999 members seemed “disproportiate”.
He added that this appeared to contradict wider concepts such as value for money.
“A £10,000 levy will significantly distort the value for money assessment for Ssas and isn’t consistent with ensuring good outcomes for clients.”
McPhillips also claimed that if option three was implemented, it would set a “very worrying precedent”: that a publicly funded body (rather than elected MPs) could decide that “a type of pension vehicle that has been in existence for 50 years should no longer be considered acceptable to regulate”.
He added: “The Pensions Regulator states in its ‘vision and values’ that it is ‘committed to the pursuit of good outcomes for workplace savers’.
“The proposed option three would not deliver this outcome for the thousands of members of Ssas around the country. In fact, it would achieve the opposite outcome in our view, and we sincerely hope that the special and unique nature of Ssas is recognised in this consultation.”
But others such as Martin Tilley, chief operating officer at WBR Group, believe there may not be a need for “doom and gloom” as he is not convinced these proposals will apply to Ssas’. He believes the government will look to create an exemption for these type of schemes.
