Regulation is expensive and getting more expensive, as most of you can attest.

There was a good illustration of that this week with new proposals from the DWP on its General Levy to cover pensions regulation.

The DWP says that without significant increases in the levy it faces a £200m deficit on its pension regulation funding.

In short, it needs more money.

The levy on pension scheme funds The Pensions Regulator (TPR), The Pensions Ombudsman (TPO), and the pensions-related activities of the Money and Pensions Service (MAPS).

The proposal has naturally got the pensions sector up in arms, particularly the SSAS providers and small scheme managers who face an extra burden - potentially. The Association of Member-Directed Pension Schemes (AMPS), the industry body for SIPP and SSAS providers, has said it has “deep concerns” about the proposals and will consult its 120 members on their views.

One of the three proposals from the DWP could mean a £10,000 minimum levy on SSAS schemes. This would push up the levy from under £100 for most schemes to 100 times that amount. It could potentially jeopardise the viability of some SSAS schemes.

Some have already said this is scaremongering but there is no doubt the DWP is serious about getting the industry to pay more.

Ironically the Small Self Administered Schemes sector is one of the best run in the entire pensions sectors. It's a model of the benefits of good regulation.

Schemes are usually used by professional such as dentists, lawyers, architects and the like to buy their own premises and benefit from owning that through a pension scheme. Some solid advisory firms and strong trusteeship has ensured the SSAS sector has maintained a good reputation, mostly free of the rogue advisers that have plagued the SIPP sector for many years.

The issues here is not really the DWP and its desire to make the sector pay more for its regulation. There are a number of proposals on the table and I suspect that a sensible compromise will be reached eventually.

The issue is really the rising cost of regulation. Compared to the Wild West pre-Maxwell era of the 1980s and early 1990s, pensions are now far better regulated and the fact is they need to be. Pensions have been a magnet for crooks, bad advisers and fraudsters enticed by the prospect of getting their hands on large pension pots and either stealing the money or ripping off clients with extortionate charges.

Most would agree the extra regulation is helping to transform the sector and will ultimately improve trust. That can only be a good thing but it costs and the cost is going up.

The SSAS sector here is not the villain and probably can afford to pay a bit more but some of the DWP proposals, particularly the potential £10,000 premium for SSAS schemes, are just too disproportionate and should be reviewed. There is no point improving regulation of the SSAS sector by killing it off of or making it so unprofitable providers and clients go elsewhere.

Regulation is vitally important to improve public trust but introducing costs that are so high they drive out regulated firms makes no sense. A balance is needed.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days. Follow @FPT_Kevin