Pensions Bulletin 2025/29

Government launches Pensions Commission to examine looming pensions inadequacy

The Government has launched a Pensions Commission to explore the barriers stopping people from saving enough for retirement and to make recommendations for change beyond the current Parliament.

The new commission will be overseen by Baroness Jeannie Drake (who sat on the Turner Commission), Professor Nick Pearce of Bath University (who will be responsible for steering its work) and former Kingfisher chief executive Sir Ian Cheshire. The Commission is to work closely with stakeholders such as the Confederation of British Industry and the Trades Union Congress.

The Commission has been set up amidst concerns that the country is moving backwards on pensions adequacy with four in ten working age people not on track to meet target replacement income and young people, low earners, the self-employed and people from Pakistani and Bangladeshi backgrounds particularly exposed.

The Commission’s terms of reference are to consider the long-term future of the UK’s pension system, including:

• Outcomes and risks for future cohorts of pensioners on current trajectories through to 2050 and beyond;
• How to improve retirement outcomes, especially for those on the lowest incomes and at the greatest risk of poverty or under saving;
• The role of private pension provision and wider savings, building on the foundation of the State Pension, in delivering financial security in retirement and supporting those approaching retirement; and
• The long-term challenges of supporting an ageing population.

It appears that such matters as the future of the triple lock and pensions tax are not in scope.

The Commission is charged with producing its final report in 2027. Although it seems likely that pension contributions will have to increase, the Government is ruling out any increase in minimum auto-enrolment contribution rates in this Parliament. This would seem to mean that the 2023 Act of Parliament that sought to implement the 2017 auto-enrolment review, after much delay by previous Governments (see Pensions Bulletin 2023/37), will not now be activated.

Alongside the announcement of the launch of the Commission, the DWP has published some research reports that provide some insight into the scale of the issue facing the Commission. These include the following:

• Analysis of Future Pension Incomes 2025 – showing that 43% of working age people (equivalent to 14.6 million people) are under saving for retirement and private pension income for individuals retiring in 2050 could be 8% lower than those retiring in 2025.  
• Gender Pensions Gap in Private Pensions 2020 to 2022 – showing a 48% gender pensions gap in private pension wealth between women and men.
• Analysis of Automatic Enrolment Saving Levels – showing that the average contribution rates as a percentage of total pay for those saving is lower in the latest year (2023) compared to the level before auto-enrolment started to roll out in 2012 – reflecting how auto-enrolment has brought in new savers saving at lower contribution levels, along with employees moving from DB to DC schemes where average contributions have historically been lower.

A policy paper completes the Government material relating to the launch of the Commission.

State Pension Age review kicked off

In the same announcement launching the Pensions Commission the Government has appointed Dr Suzy Morrison of the Pensions Policy Institute to produce an independent report on specified factors relevant to the review of State Pension Age. The Government Actuary’s Department will prepare a report examining the latest life expectancy projections data. Documents relating to the review, including its terms of reference, can be found here.

This is the third review of State Pension Age, which under the Pensions Act 2014 has the above two components and is required to be completed within six years of the completion of the second review.

The second review concluded in March 2023 with the then Government deciding (see Pensions Bulletin 2023/14) that the legislated for rise from 66 to 67 would take place as planned between 2026-28, but there was to be no change for now to the rise from 67 to 68, currently set to happen between 2044 and 2046. However, it did decide that a further review should take place within two years of the then next General Election to reassess the increase to 68.

The Government says that this review will sit alongside the work of the Pensions Commission with the latter’s independent report informing Dr Morrison’s review.

Government adjusts its inheritance tax proposals on unused pension funds and death benefits

Following a ministerial statement by James Murray, Exchequer Secretary to the Treasury, the Government has published draft legislation for inclusion in the Finance Bill that will follow the Autumn Budget. This is an annual event and much of the draft legislation published is not of direct relevance to pension provision. However, this extensive suite of materials does include supporting documents to bring unused pension funds and certain death benefits into scope of inheritance tax from 6 April 2027.

To accompany this, HMRC’s response to the October 2024 consultation on the means by which inheritance tax is to be applied to pension assets and benefits (see Pensions Bulletin 2025/04) has been published. This response reveals that the Government has made some significant adjustments as a result of the consultation, making it a personal representative-led process (rather than the pension scheme administrator-led process originally proposed), taking lump sum death in service benefits out of scope (including those paid without discretion as is often found in the public sector) and introducing a “scheme pays” mechanism under which beneficiaries (such as children of the deceased) facing an inheritance tax charge on their inherited pension pots can direct that the pension scheme pays that charge (and reduces their pot accordingly).

Consultation on the draft legislation closes on 15 September 2025. Regulations will come later, amending the Registered Pension Schemes (Provision of Information) Regulations 2006 to require pension scheme administrators and personal representatives to exchange all the necessary information for inheritance tax purposes and income tax if due on inherited pensions.

See our News Alert setting out further information and analysis of this important development.

Pensions Regulator gives positive spin to the work it has done and its future plans 

The Pensions Regulator has published its Year 2 update to its 2024-27 corporate plan alongside its 2024/25 annual report and accounts. It said that its corporate plan update has driving up trusteeship standards, delivering value for savers and encouraging the development of safe pathways that lead to good retirement outcomes at the heart of it. And it says that the annual report and accounts has stronger, more meaningful engagement with the pensions market, a renewed focus on standards of trusteeship, and a drive to harness digital, data and technology to improve the experience for savers, as highlights of a year of change.

Corporate Plan

In the Year 2 update to its 2024-27 corporate plan the Regulator says that the Pension Schemes Bill will drive much of its work over the next year, but that during this time the Regulator will also focus on delivering against the following “corporate” priorities:

• Savers get good outcomes when they join a scheme.
• All schemes are well-run.
• Pension schemes offer value to savers.
• Savers get good outcomes at retirement.

Under each of the last three priorities the Regulator sets out numerous “core delivery” objectives for 2025/26, all of which are very familiar. After this, the Regulator talks about its evolving organisation before concluding with how it will manage its performance, with a number of expected outcomes relating to each of the above four corporate priorities and a number of expected outcomes relating to each of four “enabling” priorities, which are about how the Regulator is run.

Annual report and accounts

The 2024/25 annual report and accounts contain detail of the organisational change that has taken place amongst other things before looking at the Regulator’s performance as measured through its Key Performance Indicators. It says that it achieved its target (or is on track to do so in a future year) in 28 cases, marginally missed its target in 3 cases and missed its target by a significant degree in one case. This one case relates to cyber risks and technology in the pensions sector, but there is no indication of what caused it to be given a red rating. In one of the amber ratings there is a curious mention of a “bid being made for a Pension Reform bill in the next parliamentary session” suggesting that there may be another Pensions Bill after the one currently going through Parliament. Seemingly, this might include new powers for the Regulator in relation to information gathering, rulemaking, administration standards and professional trustees.

The Regulator, which is resourced by nearly 1,000 people, spent over £105m in 2024/25, financed almost entirely by grant-in-aid received from the Department for Work and Pensions, with £68m of this being raised through the general levy on occupational and personal pension schemes. This expenditure was some £7m below budget due to lower spend on strategic initiatives and its headcount being below budget. It is expecting to spend significantly more in 2025/26 reflecting increased headcount at the end of 2024/25 and anticipated growth into 2025/26. 

Pensions Ombudsman closes more cases than ever before, but demand continues to build

The Pensions Ombudsman has published its 2024/25 annual report and accounts, highlighting that during this period and following the successful implementation of its Operating Model Review programme, the Ombudsman has closed more cases than ever before.

According to the report, during 2024/25, the Ombudsman resolved 9,435 pension complaints compared to 6,634 in 2023/24, representing a 42% increase for the year. But the Ombudsman also experienced a significant rise in demand for its services, which increased by 39% compared to 2023/24. Separately, 8,561 new general enquiries were resolved, a 10% increase on 2023/24.

The Ombudsman himself recognises that more needs to be done to reduce waiting times on pension complaints but says that through the Operating Model Review programme and its developing strategy, which importantly contains measures to reduce demand for pension complaints requiring the Ombudsman’s input (such as requiring internal dispute resolution processes to be exhausted first), it has solid foundations to build upon as it considers its strategy for the next three years.

Turning to the report itself, the Ombudsman met only 7 of its 14 key performance indicators, reflecting to a large extent, the pressure felt as a result of soaring demand. The report also shows that the substantial jump in complaint resolutions in 2024/25 was largely down to applications found to be invalid, with increased Resolution service closures (up 19%) and Adjudication service closures (up 72%) also contributing.

Timescales for pension complaint closures have started to reduce, but unfortunately, the number of active pension complaints aged over 18 months increased slightly, despite the ambition to make significant inroads. The report says that these oldest cases are typically handled by the Adjudication service, tend to involve complex or specialist matters which require more time to allocate and investigate, and not all adjudicators have the knowledge and experience to investigate them.

The Ombudsman talks about his discussing a “more sustainable financial settlement with DWP” and his predecessor talks about tackling the funding gap being a key focus, with the possibility of legislative change that will allow the Ombudsman to raise additional funding independent of the existing pensions levy. It is not clear what is intended, but this could be another topic for a future Pensions Bill.

The report also covers the activity of the PPF Ombudsman, but there is very little to report here.

Pensions Regulator fines NOW Pensions and its trustees

The Pensions Regulator has announced that it has given penalties of £50,000 to each of NOW: Pensions Ltd (NPL) and NOW: Pension Trustee Ltd (NPTL) for failing to correctly report “significant events” under the master trust legislation and failing to report breaches of the law to the Regulator. Both penalties, which are the maximum that can be levied, have been paid in full. This is the first time that the Regulator has taken enforcement action against an authorised master trust for statutory failures to report.

Ahead of linking to its regulatory intervention report (which in turn links to the Determination Notice), the Regulator says that historic failures, which led to more than 80,000 statutory communications not being sent, were not reported as significant events to the Regulator. NPL and NPTL reported two of the same communication failures as breaches of the law. However, they failed to do so as soon as reasonably practicable.

The Regulator says that these communications, which were not delivered to scheme members and potential members, were to inform them of their rights under auto-enrolment legislation. As a result, these individuals suffered non-financial and, in some cases, financial detriment by being denied the opportunity to make choices over their auto-enrolment options.

The Regulator concludes by saying that NOW has since satisfied it that it has made changes to enhance its processes around reporting so that the Regulator can continue to manage risks effectively, ensuring the security and quality of the scheme for its members.

The regulatory intervention report itself shows that there were three incidents, but it is not clear what these failed communications concerned. The first was about bounce backs to sent e-mails, whilst the second and third were about missing e-mail addresses.

NPL and NPTL took issue with the warning notices issued by the Regulator before agreeing that there had been three separate failures to report significant events and two separate failures to comply with the breach of law reporting requirements and that these failures should result in a financial penalty to each party.

The report concludes, with some lessons that the master trust and wider industry should learn – ie communicate effectively with members, report problems early, check systems and processes, know what a significant event is and get data ready.

FRC finalises its update to TAS 300

The Financial Reporting Council has announced that it has published version 2.1 of Technical Actuarial Standard 300: Pensions (TAS 300). This followed a consultation which closed in March 2025 (see Pensions Bulletin 2025/10). This new standard will be effective for technical actuarial work completed on or after 1 November 2025.

The FRC published a feedback statement and impact assessment which highlights the following changes (amongst others) as a result of the consultation:

• Longer implementation – an extension from the proposed one month to over three months before the updated standard comes into force, to reflect concerns that one month was insufficient for actuarial firms to make appropriate changes to processes and procedures and to check for compliance with the revised standard.
• Old regime scheme funding valuations can be excluded – technical actuarial work for valuations with effective dates before 22 September 2024 can continue to use version 2.0, reflecting the fact that version 2.1 has been designed very much for new regime valuations, whilst version 2.0 was designed for old regime valuations.
• Clarification and adjustments to information in the scheme funding report – there is clarification that aspects of the new trustees’ funding and investment strategy document are not required to be included in the scheme funding report. There is also removal of the current requirement to provide information relating to the expected future progression of the solvency level given that under the new funding regime, trustees and others will generally have more information than previously about how the funding level of the scheme is expected to progress in future.

Many of the other changes are to the scheme funding section of the TAS.

Connecting voluntarily to the pensions dashboard ecosystem

Not all pension schemes need to connect to the pensions dashboard ecosystem, but a number of those not required to connect can choose voluntarily to do so.

With this in mind, the Pensions Dashboards Programme has published a blog outlining what voluntary connection involves, who may apply, and why it might be beneficial for schemes and their members.

The blog points to some useful guidance on voluntary connection which amongst other things shows that MaPS will set an appropriate connection deadline in collaboration with the applicant, which will never be earlier than 31 October 2026. The guidance also points out that MaPS will always prioritise those schemes that are required to connect. Finally, the PDP says that it is seeking industry feedback on voluntary connection to help inform the application process and its timeframe and asks those interested to read the guidance and complete a feedback form.