Pensions Bulletin 2025/38
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This edition: PPF confirms there will be no levy in 2025/26, Pensions Regulator speaks to the changing nature of DB pensions, Pensions Regulator provides update on LDI risks and their mitigation, and more.
PPF confirms there will be no levy in 2025/26
The Pension Protection Fund has announced that it will not be raising a “conventional” levy for the 2025/26 financial year.
Back in January 2025, when the PPF finalised its levy rules for 2025/26 with a view to raising £45m, it made provision to set a zero levy if legislation was brought forward and sufficiently progressed to enable the PPF to bring back levy charges in the future if needed (see Pensions Bulletin 2025/05). The Pension Schemes Bill, introduced to Parliament in June 2025, contains the flexibility that the PPF needs.
Last month the PPF said that it would continue to monitor progress as the Pension Schemes Bill makes its way through Parliament (see Pensions Bulletin 2025/31). The PPF has now made clear that given the progress being made by the Bill and the broad support among policy makers and stakeholders for the change, it can move to a zero levy for 2025/26.
The reference to not raising a conventional levy is because while the scheme-based levy for an “alternative covenant scheme”, such as a superfund, follows the same set of levy rules as conventional DB schemes, the risk-based levy for such schemes is calculated using a different set of levy rules and as such it would seem that these schemes will still be required to pay a PPF levy in 2025/26, albeit only on the risk-based component.
The PPF also says that, in due course, it will engage with industry on its levy plans for 2026/27, which will be informed by the remaining passage of the Pension Schemes Bill.
On a separate matter there was some discussion about PPF indexation levels whilst the Bill was at Committee stage and whether there should be any change. The Government was not drawn on the issue then, but the PPF’s zero levy announcement says that the PPF “continues to prioritise supporting the Government’s consideration of PPF indexation levels, work that is unaffected by the move to a zero levy”, which suggests that there could be an announcement from the Government about this matter at some future point.
Comment
And so the levy that was to raise an estimated £100m, and which was then reduced so it was to raise an estimated £45m, has now been cancelled pretty much altogether. This is most welcome news for those DB schemes and their sponsoring employers that would otherwise have had to pay a levy that the PPF does not need.
Pensions Regulator speaks to the changing nature of DB pensions
In a wide-ranging speech from David Walmsley, Director of Trusteeship, Administration and DB Supervision at the Pensions Regulator, the changing nature of the DB pensions landscape was addressed under three themes – the changed funding reality, the consequential availability of more options to deliver the pensions promise, and the need for trustees to have the highest standards to be able to make the right choices for scheme members.
Mr Walmsley notes that the transformation in scheme funding has opened new strategic options for trustees and that although “buy-out remains a strong endgame” it is not the only route, with running on potentially suiting well-funded, well-governed schemes with strong employer covenants. And in relation to such schemes he recommends that a surplus policy is developed by the trustees, with employers and inclusive of member views, and informed by legal and covenant advice.
Turning to the need for the highest of standards he looks to the role that productive finance can play in a DB scheme’s investment portfolio, calling on trustees to have the right skills, access to high-quality advice, and governance structures that support challenge, transparency, and accountability, to pursue productive finance responsibly. He also talks about governance more generally in relation to investment decision-making.
Other topics covered are ESG and pensions dashboards (where the need for “accurate, complete, and accessible data” is highlighted along with a warning to DB schemes that are delaying their preparations due to plans to derisk or wind up).
He concludes by recapping on the new demands being placed on DB scheme trustees, sets out a promise of further engagement with professional trustee firms and the wider market to understand risk controls and promote good governance, and says that this Autumn the Regulator will consult on a new strategy for raising trusteeship standards through compliance and oversight.
Comment
This speech provides a useful insight into current Regulator thinking on the DB landscape and its changing expectation of trustees. Although there is little here that has not been said already by the Regulator in recent speeches and guidance, it contains clear, strong statements that may be counter to the way in which some trustee boards currently operate.
Pensions Regulator provides update on LDI risks and their mitigation
The Pensions Regulator has published a “market oversight” document that sets out the steps pension schemes and the investment industry have made to improve operational resilience in relation to liability-driven investment risks. This is a follow on from its April 2023-published guidance to help trustees manage risks associated with LDI strategies (see Pensions Bulletin 2023/17). The 2025 document also analyses data collected through the annual scheme return since then.
The Regulator says that the size and duration of LDI exposures have reduced materially since the end of 2021 when long-term interest rates reached a low point – and so day-to-day changes in the value of LDI are much smaller than they have been historically.
The Regulator also says that the LDI sector has made significant steps to improve resilience following the gilt crisis in 2022. Regulatory intervention strengthened governance and enhanced risk management practices strengthened the sector’s ability to withstand market shocks. Key areas of improvement include compliance with interest rate buffers, improved recapitalisation processes and increased focus on liquidity.
However, greater focus in future is needed in a number of areas including diversification of collateral assets and resilience testing to ensure robust risk management in adverse market scenarios.
Comment
This report, while seeming to be largely “for noting”, with the various expectations of trustees that are set out being little more than those in the 2023-published guidance, is nonetheless a useful reminder of that guidance, particularly to those operating and those advising on LDI strategies.
House of Lords looks at the practicalities of applying inheritance tax to pensions
The House of Lords Finance Bill Sub-Committee has launched an inquiry on two aspects of the July 2025-published draft legislation that will be included in the Finance Bill that will follow the 26 November 2025 Budget. One of these is the Government’s proposed legislation that will apply inheritance tax to unused pension funds and death benefits from 6 April 2027, the Government consultation on which closed last week (see Pensions Bulletin 2025/37).
The Committee’s focus is on how the Government’s tax policy can best be implemented and administered, not whether inheritance tax should be extended to such pension benefits.
The deadline for the submission of written evidence is 5pm on 7 October 2025.
Comment
As has been seen from the responses to the Government’s own consultation, although there are a number of technical amendments that should be made to the draft legislation, many of the concerns about how this new tax can be successfully administered will not be known until it is clear how the secondary legislation will operate
PASA launches toolkit for dashboard warning and unavailability messages
The Pensions Administration Standards Association has published a toolkit whose purpose is to assist with the delivery of consistent approaches to warning and unavailable codes for when an administrator or provider can’t provide complete and accurate value data immediately in response to a view request from a scheme member received through the pensions dashboard ecosystem. PASA says that without clear guidance, approaches risk diverging unnecessarily, potentially leading to inconsistent saver experiences and confusion.
The toolkit includes guidance on the use of specific unavailable codes and warning codes, supporting savers where value data can’t be updated immediately, and ensuring communication strategies anticipate and explain dashboard delays or exceptions.
The content has been produced with the assistance of the Pensions Dashboards Programme and the Money and Pensions Service. PASA expects the content will evolve over time in response to savers’ reactions to pensions dashboards including through live testing.
PASA encourages all trustees, administrators and providers to use the toolkit as a reference point to help deliver a dashboards experience which works as intended, giving savers confidence in the information they see.
Comment
This short technical guide covers a number of different scenarios and will hopefully be of assistance to those responsible for making data available to pensions dashboards and avoid unnecessary confusion and queries from scheme members.
MaPS publishes its strategic plan
The Money and Pensions Service (MaPS) has published its Strategic Plan 2025-28, outlining the organisation's refreshed mission, vision and strategic priorities.
MaPS says that since it published its strategy for 2022-25, it has made significant progress, including establishing MoneyHelper as a trusted source of impartial information and guidance for millions of people looking for help with their money and pensions. It has also developed “a new and much-improved” digital Pension Wise service and is building the infrastructure for the successful future launch of pensions dashboards.
Over the next three years its plans include delivering the pensions dashboards programme and launching the MoneyHelper Pensions Dashboard and to continue to improve it. MaPS says that the dashboard will transform the way that people interact with and manage their pensions. MaPS also says that as pensions dashboards become available to the public, it will explore opportunities with commercial providers to signpost their customers to MoneyHelper, where they would benefit from impartial information and guidance, or to debt advice where appropriate.
Comment
There is little doubt that the key deliverable for MaPS over this coming period is the successful launch of the MoneyHelper Pensions Dashboard, but there is much more to MaPS than this as it seeks to contribute to helping people manage their money, particularly those who would clearly benefit from using their services.
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