Pensions Bulletin 2025/28

Chancellor sets out reforms to the financial services sector in her Mansion House speech

The Chancellor gave her keenly awaited Mansion House speech in the City of London on 15 July 2025 in which she set out a number of reforms to financial regulation. Dubbed the Leeds Reforms, they promised reintroducing informed risk-taking into the financial system, cutting unnecessary red tape, driving more finance into public markets and actively helping international companies to set up in the UK.

Of particular note is her desire to encourage retail investors away from cash savings accounts, firstly through an industry-led advertising campaign and from April 2026 through the Financial Conduct Authority rolling out targeted support (see Pensions Bulletin 2025/26). The Government says that targeted support will allow banks to alert customers about specific investment opportunities to consider shifting money from low-return current accounts to higher-performing stocks and shares investments. To assist with the implementation of targeted support, the Government published its proposed changes to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 on which consultation closes on 29 August 2025.

There will also be a review of risk warnings on investment products to make sure they help people to accurately judge risk levels. The Government will continue to consider reforms to ISAs and savings to achieve the right balance between cash savings and investment, with a first step being to allow Long Term Asset Funds to be held in Stocks & Shares ISAs next year.

Amongst the plethora of documents accompanying her speech was the Government’s response to its UK Green Taxonomy consultation from last November (see Pensions Bulletin 2024/45). The response says that a UK Taxonomy would not be the most effective tool to deliver the green transition and should not be part of the Government’s sustainable finance framework.

Nest makes a profit for the first time

Nest has published its 2024/25 annual report and accounts for both the Nest pension scheme and the Nest Corporation three months after the scheme year end – much earlier than last year where publication was in October and December respectively. Also, unlike last year, the publications were announced via a press release.

Corporation report

The Corporation report celebrates the fact that Nest has recorded a profit (£11.9m) for the first time, meaning that all the Scheme’s operating expenditure was covered by income from member fees and charges. The report goes on to confirm that the Scheme has also now made its first repayment to the DWP of the Government loan it received and that it should, based on current forecasts, be on track to repay the loan – currently standing at £1.2bn – in full during 2038. The report also notes that Nest’s membership is expected to reach 17m people by 2030 (1m less than expected last year no doubt due to the slowing in growth noted below) but still anticipating having more than £100bn of assets under management by then.

Pension scheme report

The pension scheme report highlights that its membership grew from 13m as at March 2024 to 13.8m as at March 2025 and now reflects approximately 46% of the UK’s working population. Within this the contributing membership has increased slightly over the year to 3.9m (from 3.8m), but its non-contributing membership has grown again, though by less than in the previous year, from 9.2m to 9.9m. This slowing in growth is attributed to the fact that although the year has seen a significant increase in registered employers, many of these new employers have fewer than 50 staff. Annual total contributions grew from £7.3bn to £8.0bn whilst assets under management grew from £40.6bn to £49.8bn.

The report notes that Nest has already invested £10.6bn in the UK and reminds us that it is a proud signatory of the Mansion House Compact. It highlights Nest’s new partnership (announced in September 2024) with Legal & General (L&G) and PGGM, to collectively invest in Build-to-Rent (BTR) properties across the UK, going on to note the public confirmation in March 2025 of the first site under this initiative (Deansgate in Manchester) where a brownfield site will be transformed into nearly 500 high-quality rental homes.

PPF surplus continues to build

The Pension Protection Fund has published its 2024/25 annual report and accounts, marking its 20th anniversary with a good financial performance. The ratio of assets to liabilities (the funding ratio) increased from 166.5% to 177.7% over the year ending 31 March 2025. Although assets under management fell once more, from £33.1bn to £32.2bn, liabilities fell by even more, from £19.9bn to £18.1bn, resulting in the excess over liabilities increasing from £13.2bn to £14.1bn. (These figures allow for schemes in assessment that are likely to transfer.)

This £14.1bn figure compares with the estimated combined deficit of every single DB scheme that is running a deficit on PPF compensation benefits of around £30bn. This is stated to be up from £21bn last year, though this is in itself a revised figure based on data from the Purple Book which incorporated a revised methodology (see Pensions Bulletin 2024/48) – it was originally reported as £3bn in last year’s annual report and accounts.

Claims increased to £63.2m (covering 23 schemes) – nearly half of which was from one scheme – compared to £14.7m in 2023/24. Although claim levels could further increase if insolvency rates worsen, the scheme funding position is such that the PPF believes that a significant number of such schemes would not transfer to the PPF.

During the year, the PPF confirmed its plans to reduce the PPF levy for 2025/26 to £45m and included a provision in its Determination rules to calculate a zero levy should the Pension Schemes Bill progress sufficiently during the year.

The Fraud Compensation Fund has seen three more cases added, bringing the running total to 167, and as before, these are being assessed over a number of years. The net cost of claims processed in 2024/25 was £100m, down from £115m in 2023/24. However, the Fund’s deficit increased by £60m to a net liability position of £135m. This is not the complete picture – the PPF estimates that total claim payments, net of confirmed redemptions, is £327.4m. It has also set a contingent liability provision of £163.3m for possible claims. As the PPF’s current liquid funds and future FCF levy income will be insufficient to pay expected claims a loan facility from the DWP has been obtained from which £54.1m has been drawn down.  

Lobby group sets out alternative to applying inheritance tax to unused pension funds on death

The Investing and Saving Alliance (TISA) has set out, in a new report it commissioned from Oxford Economics, the fiscal impacts of two alternative tax-raising measures to the Government’s October 2024 Budget decision (see Pensions Bulletin 2024/42) to include unused pension funds and death benefits within the value of a person's estate for inheritance tax purposes for deaths from 6 April 2027.

These alternatives are as follows:

• Inherited pension pots and DB lump sum death benefits can only be taken as taxable income over time if the beneficiary is a dependant. If not, the beneficiary must take the full pension value as a lump sum, paying income tax at their marginal rate. Income tax is charged only if the deceased’s remaining unused fund exceeds £90,000.
• A standalone flat rate “inheritable pension tax charge” is paid on all unused pension funds and DB lump sum death benefits above a threshold. Each deceased individual has their own threshold and there is no spousal exemption. Separately, the income tax treatment of pensions based on age remains unchanged with pension wealth being tax-free when the deceased is under the age of 75 and taxed at the recipient’s marginal rate when the deceased is over the age of 75. Three combinations of threshold and flat rates have been modelled for this proposal.

Neither proposal applies the IHT legislation as the Government is intending to do. TISA also emphasises their view that annuity death benefits and registered group life insurance (i.e. death in service payments) should remain outside the scope of IHT, as they cannot be used as tax incentivised wealth savings vehicles and serve as an important financial lifeline for beneficiaries.

TISA says that under its proposals the Government’s fiscal and policy goals can be met whilst avoiding unnecessary stress and delays for grieving families and causing long-term behavioural change among consumers that are not fully understood, particularly around pension contribution levels and withdrawals. Furthermore, each of the proposals has been designed to ensure that the revenues raised align closely to the revenues expected to be raised through the Government’s proposals. 

PDP announces big step forward in connection to pensions dashboards ecosystem

The Pensions Dashboards Programme has announced that hundreds of pension providers and schemes and 20 million pension records, as well as the State Pension, are now connected to the pensions dashboards ecosystem.

The ‘dashboards town hall event’ hosted by the Money and Pensions Service on 9 July 2025 also featured:

• An outline of the approach to consumer testing the state-provided MaPS dashboard (the MoneyHelper Pensions Dashboard), more detail of which is available here. Testing is due to start from this summer.
• A re-iteration of the Government’s intention to enable private organisations to build and operate their own dashboards – but with priority being given right now to launching the MaPS dashboard.
• Pensions Minister, Torsten Bell, confirming that the Department for Work and Pensions will give six months’ notice before the launch of the MaPS dashboard – this is the minimum period required under the law.

PASA publishes updated guidance on data matching

The Pensions Administration Standards Association has published an updated version of its data matching convention guidance to support schemes, administrators and providers ahead of the launch of the MoneyHelper Pensions Dashboard.

This is the latest in a number of updates to the guidance since its first issue in December 2021 (see Pensions Bulletin 2021/51). As before, its purpose is to assist schemes, or those acting on their behalf, decide how to respond to “find requests” from pensions dashboard users.

This 2025 edition of the guidance builds on industry experience and regulatory developments since the original guidance was published and according to PASA “now provides a detailed roadmap for setting robust matching criteria” which is essential for schemes and providers seeking to fulfil their legal duties while protecting member data.

The updated guidance includes best practice criteria for both ‘Match Made’ and ‘Possible Match’ responses, outlines the use of unique identifiers, and explores how data matching performance should be monitored and improved. It also highlights how matching can support broader data improvement efforts across schemes and providers – but where data improvement actions are proposed as a result of matching, recommends that data controllers seek legal advice, given data protection law.

PASA expects to update the guidance a number of times in the future, with the first likely to be in 2026 once there has been a sufficient volume of citizen user testing to provide real experience data.

PASA publishes De-risking Jargon Buster

The Pensions Administration Standards Association has published a new De-risking Jargon Buster. PASA says that it provides accessible, clear explanations of commonly used de-risking terms and options, including liability management exercises, buy-ins, buy-outs, capital-backed journey plans, and longevity swaps.

PASA explains that this is the first in a wider series aiming to break down myths and bring clarity to an area which is increasingly central to scheme strategy.

Pension (Special Rules for End of Life) Bill withdrawn

As expected, the private member’s Bill that extends the ability of the Pension Protection Fund and Financial Assistance Scheme to make terminal illness payments (see Pensions Bulletin 2025/04) has been withdrawn. Although no reasons have been stated, the withdrawal of the Pension (Special Rules for End of Life) Bill is almost certainly because what it is seeking to achieve is now included in the Government’s Pension Schemes Bill.