Pensions Bulletin 2025/37

Pensions Regulator examines the pensions administration marketplace 

The Pensions Regulator has issued a market oversight report on pensions administration. This follows last year’s announcement (see Pensions Bulletin 2024/35) that the Regulator intended to engage with a number of pensions administration providers, both in-house and third party, DB and DC, focussed on the themes of financial sustainability, technology, risk management and cyber resilience.

In its report, following engagement with 15 administrators, the Regulator says that pension administration is now recognised as a critical driver of good outcomes with increasing regulatory demands, technological transformation and rising member expectations meaning that the role of administrators has never been more critical. 

Key findings include: 

• Administration is increasingly recognised as a higher-value function, with profitability returning after years of under-investment. 
• Recruitment and retention remain difficult, particularly in DB administration, although some providers are investing in training academies, apprenticeships and offshoring. 
• Legacy systems still constrain efficiency, but administrators are investing in modernisation, member portals and digital ID solutions. 
• Data quality continues to present challenges, especially during transitions to new administrators or insurers. 
• Use of artificial intelligence is growing with chatbots and predictive models being rolled out, but AI governance approaches are patchy. 
• Strong examples of approaches to risk and change management were found. 
• Cyber resilience has improved, but supply-chain oversight and business continuity planning (BCP) remain inconsistent. In particular, BCP shows gaps, with communication protocols and executive oversight sometimes missing or lacking supporting documentation, and only a minority of administrators are certified to ISO 22301 for external validation of BCP systems. 

The Regulator says that administration is improving but to keep improving there needs to be: 

• Investment now for the future in administration services – with investment in technology, systems and data being prioritised. 
• Data improvement, which must be a priority for all. 
• Greater responsibility and accountability taken by trustees for driving up administration standards, as part of their fiduciary duty; a lack of understanding of administration was found to persist among some trustee boards. 
• Risk and change management built into everyday operations. 
• Attention to the identified gaps in cyber security. 

The Regulator expects administrators and trustees to reflect on these findings and work together to identify ways to improve administrative practices. 

The Regulator’s next steps include developing an administration strategy, setting clear expectations of trustees by updating its administration guidance and continuing engagement with administrators. It will also provide feedback to the DWP to help shape future legislation. 

Pensions Regulator warns about impersonation fraud 

The Pensions Regulator has issued a new style “industry alert” in which it highlights a pension fraud technique identified from Action Fraud reports, involving unauthorised access to pension scheme members’ accounts using hacking and impersonation. Directed at pension scheme trustees and administrators, the alert urges them to be vigilant and report any suspicions. 

The alert goes on to list some of the methods being used to bypass pension scheme defences and exploit security vulnerabilities to gain unauthorised access to members’ accounts. It then sets out recommendations that include the following: 

• Educate members on the importance of online security and provide signposts to the City of London Police identity fraud guidance and to the Stop! Think Fraud website for further information on fraud; 
• Review scheme systems and controls; and  
• Report fraud or cybercrime to Action Fraud. 

The Regulator has provided a signpost to this alert by means of a blog by Paul Sweeney, the Pension Scams Action Group Intelligence Business Lead, in which he provides some background that has led to this alert being issued before setting out similar recommendations to those in the alert and emphasising the need for schemes to strengthen security. The blog also states that more than £17.5 million was lost to pension fraud in 2024. 

IHT on pensions – consultation closes 

Consultation has now closed on the Government’s revised plans, as set out in draft primary legislation in July 2025 (see Pension Bulletin 2025/29), for subjecting unused pension funds and death benefits to inheritance tax from 6 April 2027 and a number of organisations have published their responses to this consultation. 

In the LCP response we focus on three areas, calling for: 

• clarity on the scope of the exemption for death in service benefits to ensure that the final legislation matches the policy intent; 
• remaining inconsistencies in the treatment of survivor pensions to be addressed; and 
• early sharing of the as yet unseen secondary legislation relating to reporting and payment timescales given our concern about the challenge they will present to administrators.  

The Society of Pensions Professionals in its response (available via its consultations page) calls for a number of technical amendments to the draft legislation, some of which are to tighten up delivery of the policy intent, whilst some others are to avoid unintended consequences. Chair of the SPP’s Legislation Committee and our very own Shayala McRae said that the publication of this draft legislation “shows there are still some issues to iron out”.

The Association of Consulting Actuaries in a lengthy response welcomes the shift away from pension schemes being responsible for paying IHT in respect of unused pension funds and death benefits and those changes that will result in more lump sum death in service benefits being exempt. However, it points to personal representatives now being in an unenviable position of being responsible for paying IHT on assets they don’t control. The response also raises concerns about worsening of provisions for financial dependants, calling for wider exemptions for financial dependants. It also says that some of the proposed timescales are unrealistic and simply unworkable for some types of assets. 

We can now expect the final version of the primary legislation to be published within the Finance Bill to follow the Chancellor’s Budget which is to be held on 26 November 2025.

Committee stage concludes on the Pension Schemes Bill 

The Pension Schemes Bill completed its House of Commons Committee stage on 11 September 2025, considerably earlier than had been expected, with all the numerous Government amendments first published on 1 September 2025 (see Pensions Bulletin 2025/35) accepted into the Bill and all the non-Government amendments put to one side. 

However, the intent of one of the Liberal Democrats’ amendments, intended to abolish the PPF administration levy, which was discussed on 11 September, was broadly supported by Pensions Minister Torsten Bell, who gave an assurance that the Government intended to lay amendments at a later stage that would achieve the same aim. 

The Bill now moves on to Report stage and Third Reading, the dates for which are not yet known. 

Review proposes federated model for the operation of the Small Pots Data Platform 

Pensions UK has published the results of the Small Pots Feasibility Review, a review set up by the Department for Work and Pensions earlier this year (see Pensions Bulletin 2025/17) to inform the Government of the key components of the Small Pots Data Platform (SPDP) and the necessary underpinning primary legislation now contained within the Pension Schemes Bill. 

The Review has concluded that a united, industry-delivered model offers a feasible and cost-effective solution for implementing the SPDP by 2030 and which also fits within the primary legislation parameters of the Pension Schemes Bill. Under the proposed “federated” model, schemes and future consolidators will interact directly through agreed data and messaging standards, enabled by strong governance, with a framework of regulations, standards, and regulators’ monitoring processes, informed by the approach taken for pensions dashboards, ensuring all parties have clear roles and responsibilities. 

The alternative was to have a centralised system, but it is argued that this will be complex and expensive to build. The Review also found that there was no industry appetite to take on the centralised role. 

The Review says that the experience of the pensions industry’s development of dashboards connections also gives confidence a similar development in respect of the SPDP could be achieved in a reasonable timescale. 

Further work will be required to develop a fully operational model and the next stage, to take place alongside the development of secondary legislation, is to develop and refine this detail, including technical standards, data quality, governance, and consumer protections. This stage two of the Feasibility Review awaits defining and scheduling by the DWP. 

Pensions Regulator proposes new approach to enforcement 

The Pensions Regulator has launched a consultation on a new enforcement strategy, reflecting a shift in how it regulates the occupational pensions sector. It is also promoting this consultation via a blog from Gaucho Rasmussen, Executive Director of the Compliance and Enforcement Group at the Regulator.

After the necessary introductions the consultation document talks about making several changes to the current strategy “to make enforcement smarter, more strategic, and more impactful”, before going on to list a number of matters. These include “Putting saver outcomes first”, “Setting clear enforcement priorities”, “Acting earlier to prevent harm” and “Using data to make smarter decisions”. There is also an appendix providing more detail on the intended new approach. 

The Regulator wants to understand whether its new strategy is clear and accessible, proportionate and transparent in how it approaches, prioritises, and uses its powers to enforce, effective in delivering good outcomes for savers, and is visible and free from regulatory gaps. 

Consultation closes on 11 November 2025 and the Regulator intends to publish the final strategy and a summary of consultation responses in early 2026. Later in 2026, it will review its full suite of published policies to ensure alignment with the new strategy and may consult on any necessary changes.

State pension increases – earnings element of triple lock likely to bite in 2026 

The Office of National Statistics has published its latest set of earnings data which reveals that the provisional statistic used for the earnings element of the state pension triple lock increased by 4.7%. Should this figure be confirmed around this time in October, it is likely that the state pension will increase by 4.7% in April 2026 as it seems unlikely that the September price inflation figure will be greater. 

LCP partner Steve Webb has commented about this, including the near certainty that the headline rate of the new state pension will exceed the frozen personal tax allowance from April 2027.