UK Pension Schemes Bill: what you need to know
Explore our resource page for the 2025 Pension Schemes Bill, where we share our latest thinking on what is covered in the Bill - and what it could mean for UK pension schemes.
On 5 June 2025 the Government announced the introduction of a bumper Pension Schemes Bill. The DWP also published a road map setting out a provisional plan to implement reforms across DC and DB workplace pensions.
This Bill covers a wide range of topics. On the DB side this includes a legislative framework for superfunds, amended DB surplus distribution rules, and PPF-related matters. Key DC areas include scheme consolidation, decumulation, small pots consolidation and value for money.
The Bill completed its House of Commons stages on 3 December 2025. It is expected to be considered by the House of Lords in February 2026 and Royal Assent should follow shortly afterwards.
During its House of Commons stages many Government-backed amendments to the Bill were tabled and accepted. Our summary below reflects all these amendments.
Making best use of our industry contacts, our policy leads and technical experts will share their comments and insights here, including the key issues all schemes and sponsors need to consider.
Explore the key issues
Enabling clauses are included in the Bill that remove some of the legal barriers to surplus distribution, making it easier for surplus from DB schemes to be “safely” released to employers. This is worth collectively £160 billion by the Government’s estimate, to support employers’ investment plans and to benefit scheme members.
In addition to what appear to be wide-sweeping new powers to amend scheme rules, the Bill also adjusts the legislative test that the trustees must apply when deciding whether to release surplus. Regulations are expected to reduce the threshold funding level for surplus distribution from "buyout" to "low dependency". Taken together all this will make it easier to distribute surplus and increase the amount of surplus that can potentially be distributed.
The Government’s roadmap anticipates that the surplus regulations will come into force by Spring 2027 with the guidance to follow shortly thereafter.
The Bill provides for a new legislative framework applicable to the authorisation and supervision of DB superfunds, to replace the Regulator’s so-called interim regime. This includes rules on capital extraction and paves the way for new providers to enter the market. Quite lengthy Bill clauses have been needed to cover the necessary ground. It also appears that "onboarding conditions" for schemes to transfer to superfunds are weaker than the gateway tests in the current interim regime, with the effect that more schemes will be able to consider using this route to deliver their members’ benefits than can do currently.
The relevant regulations and associated regulatory Code are expected to come into force in 2028. For more details about DB superfunds please see our superfund hub.
The Bill provides that the Virgin Media issue is addressed by allowing current Scheme Actuaries to make retrospective actuarial confirmations in respect of relevant rule changes - so called “potentially remediable alterations”. See our press release.
In general a rule change will be in scope as long as trustees have treated the change as being valid, i.e. they have not taken “positive action” on the basis they consider it to be void and have notified members accordingly, or it had not either previously been ruled on by a court in “qualifying legal proceedings” or was in issue in such proceedings on or before 5 June 2025.
Such a rule alteration is then to be treated for all purposes as having always been a valid alteration, provided the scheme trustees make a request to the current scheme actuary to consider the matter and the scheme actuary confirms to the trustees in writing that in the actuary’s opinion it is reasonable to that the alteration would not have prevented the scheme from continuing to satisfy the then required statutory standard.
The legislation gives reasonably wide flexibility for the scheme actuary to provide this confirmation, setting out that they may take “any proper professional approach (including making assumptions or relying on presumptions)” and “may act on the basis of the information available” provided they consider it sufficient to form an opinion on the request.
For any schemes that have already wound up (including where part of a scheme has wound up), or have entered the PPF or FAS, any potentially remediable alterations will be deemed to have been validly made.
Scheme consolidation
To accelerate and help enable scale and consolidation in the DC market the Bill sets out new rules that will create multi-employer DC scheme “megafunds” of at least £25 billion.
DC multi-employer schemes operating in the auto-enrolment market need to have £25bn in assets across their pension products by 2030 but there is also an easement whereby providers with over £10bn in assets and a credible plan for achieving scale will have until 2035 to do so. These new rules apply to the “main scale default arrangement” of master trusts and certain group personal pensions.
There are provisions limiting the ability of new and “non-scale” default arrangements from being created by pension schemes and providers.
There is also a controversial temporary reserve power being taken under which the Government can set quantitative baseline targets for these main scale default arrangements to invest in a broader range of private assets, including in the UK, for the benefit of savers and for the economy.
Decumulation
The Bill contains a new duty on DC scheme trustees to offer “default pension benefit solutions” for the delivery of retirement income, which are suitable for their members. It appears from the roadmap that the Government envisages this being in place by 2026/27.
Small pots consolidation
The Bill provides for an authorised and multiple default consolidator model, whereby certain DC pots worth £1,000 or less will be automatically swept up into a consolidator scheme that is certified as delivering good value to savers. Again, quite lengthy Bill clauses have been needed. This should deliver savings to providers and simplicity to savers. However, this is still several years away since the roadmap states that the “implementation of the Small Pots Consolidation solution is purposefully designed to fully come into force once the market of a smaller number of megafunds is in place” – ie after 2030.
Contractual override and bulk transfers
The Bill enables contract-based DC schemes providers to move or consolidate their schemes and members’ pots to reduce fragmentation and improve outcomes, with adequate protections that ensure it is in savers best interests. This is currently expected to start from 2028.
Value for money
Whilst the framework for contract-based schemes is being finalised by the FCA, the Bill contains measures to apply the framework to trust-based DC schemes, with those schemes found wanting having to take remedial action and possibly having to place their savers into a scheme that is providing value for money. Once more, lengthy Bill clauses have been needed.
It is worth noting that there is much more to this than measurement and reporting. For example, a “not delivering” rating starts a process that could result in the scheme or arrangement being transferred to a better scheme. An “intermediate” rating (of which regulations may specify more than one) also starts various requirements – including preparing an “improvement plan” and providing that to the Regulator, so it is not a “benign” rating.
The Pensions Regulator is being given significant new discretions and intervention powers in this area, including challenging a rating assigned by trustees/managers. The framework will apply to DC occupational pension schemes from 2028 based on the roadmap.
The Bill removes the restrictions that prevent the PPF Board from making material reductions in the annual PPF levy or even not requiring a levy in a given year when it is not needed. And given this, on 23 September 2025 the PPF announced that it would not be raising a “conventional” levy for the 2025/26 financial year.
The Bill provides for the PPF and FAS to be brought within scope of the pensions dashboard regime so that those with deferred entitlements from either will be able to view them alongside their state and any occupational and personal pension entitlements.
The ability of the PPF and FAS to make terminal illness payments is extended through the Bill. As a result, a Private Member’s Bill covering similar ground has been withdrawn.
The Bill makes provision for certain compensation paid by the PPF in respect of a person’s pre-1997 pensionable service to be increased annually. It also makes similar provision for FAS assistance. In essence:
- if the original scheme provided increases to pre-1997 pension that was in addition to any GMP increase, then the whole pre-1997 compensation will receive indexation;
- if the original scheme only provided increases to post-1988 GMPs, then a percentage (to be determined by regulations) of pre-1997 compensation will receive indexation.
In both cases, the indexation on pre-1997 compensation is not backdated. These provisions are expected to operate from January 2027 when the first pre-1997 pension increases will be granted.
The Bill also enables the PPF’s administrative expenses to be paid out of the Pension Protection Fund and the Fraud Compensation Fund and removes the existing PPF administration levy mechanism. This funding change has effect from 1 April 2026.
The Bill contains a number of matters affecting the Local Government Pension Scheme in England and Wales with the aim of “consolidating and professionalising” their investment operations.
The Bill delivers a solution to the Pensions Ombudsman not being a competent court for the purposes of concluding overpayment disputes where recoupment is sought and indeed other disputes. This will reverse the impact of the November 2023 Court of Appeal decision.
The Bill also formally puts the funding of the PPF Ombudsman on a proper footing by providing that the Ombudsman’s expenditure is to be paid from money raised by the general levy and removing the power to impose a separate levy to meet this expenditure.
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