Act now to save SSAS

Small self-administered schemes (SSAS) are facing their biggest threat since their launch nearly 50 years ago.

Under the DWP proposals to change the General Levy on pension schemes, schemes with less than 10,000 members, including SSAS, will pay an additional premium of £10,000 from 2026.

Currently the levy for SSAS is £44, under DWP’s preferred option from 2026 it will be £10,049. A SSAS can have up to 11 members, but in practice most have 2-4. So for an average scheme with 3 members that’s £3,350 per member.

What does the General Levy pay for?

The General Levy funds The Pension Regulator (TPR), The Pensions Ombudsman (TPO) and the pension-related activities of the Money and Pension Service (MaPS). When it comes to TPR, regulation of SSAS is light touch to say the least. It seems slightly ironic that one of the reasons the government are so keen on consolidation and getting rid of small schemes is so pension savers get better value for money, yet they appear to have no issue imposing extortionate levy costs on those that benefit from it the least.

What are the alternatives?

In its review of the levy, the DWP has put forward three options to deal with the increasing funding deficit.

Option 1 is basically to keep rates as they are and let the deficit grow. This means taxpayers making up the shortfall, and in all likelihood higher increases in the future.

Option 2 is a 6.5% rise across the board to current rates for all schemes.

Option 3 is a 4% increase across the board – plus an additional premium for small schemes of £10,000, starting from 2026.

What is concerning is that the DWP has stated that option 3 is their preferred course of action. TPR has made it clear that they want “fewer, larger, well-run schemes” and want to encourage consolidation.

The review states that schemes with two to eleven members are frequently found to have “low governance standards, lower knowledge and awareness of pensions and low compliance levels”. I wouldn’t disagree that there are certainly SSASs out there where this is the case. But I would also argue that this is a problem that has largely come about since A-day when the requirement to have a professional trustee was removed. Re-instating this requirement would feel like a more proportionate response to this issue.

The additional £10,000 premium, if confirmed, will come in from April 2026. DWP has said this is to give small schemes time to transfer members out and consolidate (wind up in SSAS’ case). As those of you with SSAS clients will know, it’s not always that simple. Many will hold property, so there will be significant costs to transfer to SIPP, some will have loan backs that cannot be held in other types of pensions unless repaid first, and many have been set up for succession planning which doesn’t work in the same way in other pensions.

If you have SSAS clients now is the time to voice your concerns and respond to the review. The consultation closes on 13 November – details can be found here:

www.gov.uk/government/consultations/the-occupational-and-personal-pension-schemes-general-levy-regulations-review-2023