Future of the Levy
We consult on proposed changes to the levy rules and use feedback to better inform our final decisions
Our Levy consultation published in September 2022 set out our thinking on our long-term approach to developing the levy in response to our new funding strategy. As a result of our strong financial position, we expect there to be a material decrease in the levy in future, however, we must also be able to adjust the levy to respond to funding challenges if necessary.
Future Levy objectives & principles
We’ve set out two key objectives our future levy system must meet:
- It must be flexible – we expect the levy will be significantly lower than in recent years, but we’ll need to retain the capability to raise it in the unlikely event that should be required in the future.
- It should be simpler – our levy methodology has developed over time to appropriately reflect the many different circumstances of individual schemes and employers. As the overall amount comes down, this level of sophistication can be reduced with benefits for schemes and us.
We also want to ensure the levy is fit for purpose, more stable for levy payers, transparent and predictable – all elements our stakeholders tell us are critical.
This has led us to four design principles:
- Increasing flexibility on the levy amount we aim to collect
- increasing flexibility to charge on the basis of size of scheme (e.g. scheme-based levy)
- Reducing levy sensitivity to changes in insolvency risk which reduces volatility and increasing the emphasis on underfunding
- Applying different approaches to how the levy is calculated depending on scheme size.
There was broad support for our direction of travel from many respondents, including support for reducing the emphasis on insolvency risk and being able to adjust the levy for schemes of varying sizes.
In our consultation policy statement we have set out in more detail stakeholders’ views on our future approach. As part of our work on Future of Levy, we will reflect on the many suggestions for simplification and general comments we received.
We will continue to update this page as our work on the Future of the Levy progresses next year, and invite anyone who would like to share their views to email [email protected]