Pensions Bulletin 2025/21

As we go to press…

Later today, 29 May 2025, the Government will publish the final report of the first phase of its pensions review (see Pensions Bulletin 2024/37) and the response to the DB options consultation (see Pensions Bulletin 2024/16) that was launched by the previous administration. These important developments have come too late to report in this week’s Bulletin, but they will be covered in next week’s edition. 

PASA issues new guidance on identity management and assurance

The Pensions Administration Standards Association has issued new guidance on the topical subject of identity management and assurance. The guidance sets out best practices for administrators to mitigate identity-related fraud, bolster member protection, and future-proof processes in an increasingly digital landscape.

“Protecting identities during high risk events” outlines four key interactions that the member and scheme have during the individual’s membership where the need to verify identity is particularly important – ie when making data changes, transferring scheme benefits, member retirement and member death. The topics covered include identity proofing, verification and authentication methods, as well as multi-factor authentication and biometric solutions. The guidance also highlights the importance of tailoring identity approaches to individual scheme circumstances, and of working with professional advisers to manage specific vulnerabilities.

HMRC publishes research on salary sacrifice

HMRC has published research that it commissioned in 2023, and which reported in January 2024, on employers' experiences, motivations and attitudes towards using salary sacrifice arrangements for pensions. The research was conducted by means of qualitative in-depth interviews with 41 businesses that offered a salary sacrifice arrangement for pension contributions and 10 businesses that did not.

On motivations for offering pensions salary sacrifice, the most common reason was that it is generally seen as beneficial for both the employer and their employees due to the NIC savings for both parties. Employers offering salary sacrifice also thought it to be advantageous to recruitment and retention and easy to administer. Where employers did not offer salary sacrifice, this was mainly due to the extra administration required and lack of understanding, including in some cases that salary sacrifice led to NIC savings.

On the impact of offering or not offering pensions salary sacrifice, most employers found it easy to administer and most said that they did not use the NIC savings to fund or improve the generosity of their employer pensions contributions.

The participants were also asked to consider three hypothetical changes to tax reliefs on such salary sacrifice arrangements. These were as follows:

• Scenario 1 – apply employer and employee NICs to the additional employer pension contributions made as a result of the salary sacrifice.
• Scenario 2 – as Scenario 1 plus treat the additional employer contributions as a benefit in kind for income tax purposes.
• Scenario 3 – as Scenario 1 but only in respect of employer contributions made as a result of salary sacrificed above a £2,000 pa threshold.

All three scenarios were viewed negatively to some degree by employers, but the extent to which they led to a reported likely definitive change in employer behaviour regarding pensions varied.

And in other pensions news…

Three snippets complete our pensions reporting this week as follows:

Accessing DB surplus

Torsten Bell, the Pensions Minister, re-emphasised in a press release, the Government’s January 2025 decision (see Pensions Bulletin 2025/04) to legislate to enable surplus from DB schemes to be extracted “to boost investment and benefit scheme members”.

Once more, it seems that the Government has in mind that surplus should be measured by reference to a low dependency basis, with the £160bn surplus on this measure being mentioned prominently. Mr Bell also confirmed that the legislation will appear in the forthcoming Pension Schemes Bill and that it will enable those schemes that cannot currently access their surplus to be safely able to do so.

Addressing the pensions challenge

Nausicaa Delfas, Chief Executive at the Pensions Regulator, delivered a speech around the theme of the pensions challenge, in which she said that many people (particularly with DC pensions) risk not having enough to support themselves in later life. She stated that together we are on a path to address this challenge, and that she sees the two central tenets to the approach to be (a) ensuring value in the pensions system and (b) savers taking informed decisions at retirement.

In relation to value:

• On DB schemes she suggested that “real value means that you are in a scheme that provides members with the best opportunity to receive their promised benefit. Or even, in some cases, enhanced benefits” and promised (again) that the Regulator will soon publish new guidance on endgame options for trustees. She also said that on DB valuations the Regulator will focus its activities “where the greatest risk lies and let the well-managed schemes get on with the job of delivering for savers”.
• On DC schemes she said that over the year ahead the Regulator “will increasingly challenge schemes where we suspect value to be poor, encouraging greater transparency around performance, and taking steps to simplify the system”.

On informed decisions at retirement her remarks ranged widely, touching on pensions dashboards, oversight of administrators, CDC and the guided retirement proposals.

Pensions dashboards

Chris Curry, Principal of the Pensions Dashboards Programme, shared some reflections in a blog following the publication of the May 2025 progress update report (see Pensions Bulletin 2025/20). He said that the update was an important moment for the PDP, not only to report on what has been achieved, but also to reflect on the scale of the undertaking and the strength of the partnerships that are helping the PDP deliver the dashboard project.