Pensions Bulletin 2025/39
Pensions & benefits Pensions dashboards Pensions tax Policy & regulationThis edition: HMRC and the FCA limit scope for returning tax-free lump sums, Other news in Pension Schemes Newsletter 173, Chris Curry sees his own pensions on the MoneyHelper dashboard, and more.

HMRC and the FCA limit scope for returning tax-free lump sums
In a double announcement whose timing is of special relevance given pre-Budget rumours that the Chancellor has reductions in the maximum tax-free lump sum on her mind once more, HMRC and the Financial Conduct Authority have made clear their position on those who take their tax-free lump sum and then wish to reverse that transaction. HMRC’s stance is set out in the first article of Pension Schemes Newsletter 173 whilst the FCA has made a separate but linked statement aimed at contract-based providers.
The issue came to prominence as a result of pre-Budget rumours this time last year that the amount of the tax-free lump sum that could be taken was to be severely reduced at the 30 October 2024 Budget (see Pensions Bulletin 2024/42). This resulted in a number of wealthier pension savers over 55 taking substantial tax-free lump sums from their pension schemes whilst they thought they could, and then when the Budget contained no such measures, seeking to undo what they did, with a number of providers being willing to take the lump sum paid out back into the savers’ pension schemes.
HMRC sought to set out its position on the matter last December (see Pensions Bulletin 2024/48) and given the adverse reaction to this by some providers, has now given more detail. However, its stance is essentially unchanged.
HMRC now says that where an attempt is made to reverse an action, normally the tax consequence cannot be reversed. So, it is not usually possible to reverse the utilisation of the individual’s Lump Sum Allowance and their Lump Sum and Death Benefit Allowance where the tax-free lump sum is paid back into the scheme, which of course could well mean that when the individual eventually takes their ‘tax-free lump sum’ for good they may find that little of it is tax-free as they have, in essence, wasted their allowances.
One potential exception is where a cancellation right arises under the FCA’s Conduct of Business Sourcebook rules. However, this seems likely to apply only to annuities and not to any tax-free lump sums taken as part of the deal. This issue is explored in a little more detail in the FCA’s statement.
HMRC makes clear that registered pension schemes can offer cancellation rights for the lump sum element of cancellable contracts. However, not only is the tax consequence unlikely to be reversible, but when the lump sum is paid for good it needs to meet all the conditions of the relevant authorised payment, which may be particularly problematic if it is a pension commencement lump sum and so has to be paid within a limited time of the associated pension starting to be paid.
Comment
Whilst this latest HMRC guidance provides a potential route by which those who were able to return their tax-free lump sum may well have done so in a valid manner, this will be of little comfort for when they eventually take their lump sum.
As LCP partner Alasdair Mayes says in commenting on the HMRC and FCA statements, people should think very carefully before making major financial decisions based on speculation about what might be in the Budget. It does seem that once the tax-free lump sum is taken, it is to all practical purposes not reversible. Those worried about what the Chancellor might do on Budget Day to their tax-free lump will have to live with the consequences of whatever decision they take.
Other news in Pension Schemes Newsletter 173
There are four other topics covered by HMRC’s Pension Schemes Newsletter 173 and these concern two matters in relation to qualifying recognised overseas pension schemes (QROPS), further changes to the Finance Act 2024 legislation to come and reminders in relation to submission deadlines for the pension scheme return and the relief at source annual return of information.
Of particular note is the announcement that there are to be further changes to the Finance Act 2024 legislation that abolished the Lifetime Allowance (and introduced the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance). These “minor technical amendments” are intended to “clarify certain provisions, correct minor drafting inconsistencies and support smoother implementation”. The key amendments listed show that, whilst important for those affected, they should not affect the vast majority of pension savers. The changes will be made by way of regulations in early 2026, backdated to 6 April 2024, and HMRC will consult on the regulations ahead of their being laid before Parliament.
Comment
Despite three sets of regulations correcting errors and dealing with omissions in the Finance Act 2024 pensions tax legislation, it had been known that there was some further tidying up to be done, so it is good to hear that HMRC is now taking this forward.
Chris Curry sees his own pensions on the MoneyHelper dashboard
Chris Curry, Principal of the Pensions Dashboards Programme, recounts via a blog and also by a video his very positive personal experience of using the MoneyHelper Pensions Dashboard, as part of its internal testing, to find and have displayed his own pension entitlements. In a process which he says took less than five minutes, after he had created an account with and verified his identity through the GOV.UK One Login, he was able to view his pensions on the dashboard, including the State Pension and numerous workplace pensions. And his boss, Oliver Morley, doing the same, found a lost pension entitlement!
However, this initial testing also revealed refinements needed before consumer launch (the date for which has not yet been set by the Government). Ahead of this, there will be a consumer testing phase, initially with a small number of participants and with up to 15 connected schemes, before this testing is scaled up. Not all schemes are currently connected, but in excess of 50 million pension records are, being more than two-thirds of those in scope.
Comment
After all the years in development this blog provides a practical illustration of what pensions dashboards can deliver. We hope the consumer testing goes well and that it will not be long before the Government can announce the launch date.
Vote reporting – technical guidance published
As promised earlier this year, Pensions UK (formerly known as the PLSA) has now published technical guidance to support users of the March 2025-published template for vote reporting by asset managers (see Pensions Bulletin 2025/10).
The template was developed to support improved transparency, consistency, and engagement between asset managers and asset owners. Pensions UK says that the technical guidance builds on the FAQs document (which was published alongside the new vote reporting template in March just as an interim measure) and has been developed to support users of the template, particularly asset managers, proxy advisers, and asset owners, by providing detailed explanations for each field within the template.
Pensions UK says that the guidance offers clarity on data expectations, formatting, and interpretation, and is intended to maximise the template’s usability and uptake. It also says that there have been some changes made to the template from the version published in March and so it encourages all users to review the template and technical guidance in full.
SPP puts the case for DB and CDC schemes in today’s pensions world
In an interesting paper introduced by our own Jon Forsyth, Chair of the Society of Pension Professionals’ DB Committee, the case is put for policies that will enable collective schemes – including DB and CDC – to thrive in the decades to come.
The paper, which can be found in the guides and reports section of the SPP’s website, makes a number of suggestions to boost DB and CDC schemes, and is intended to provide “food for thought for policymakers, regulators and industry”.
Amongst the SPP’s suggestions are the following:
- Any Government improvements to the auto-enrolment pensions adequacy requirements should not be limited to DC contribution levels, as the nature of the pension scheme individuals are using is another fundamental consideration.
- If a stable and sufficiently flexible regulatory regime is provided for DB and more attractive design features are allowed for DB than currently exist, this may not only encourage the 200+ open DB schemes to remain open, but over time encourage some corporate sponsors to offer DB schemes again.
- In addition to the anticipated legislation enabling multi-employer CDC schemes to become established and to separately facilitate decumulation-only CDC schemes, other initiatives need to be explored, including enabling NEST to provide a whole of life CDC scheme and initially lowering the auto-enrolment requirement for CDC schemes to encourage adoption.
The SPP paper also looks at use of surplus, from both DB schemes and the Pension Protection Fund.
Comment
With much of the regulatory emphasis switching to DC it is good to see the SPP examine the current DB and prospective CDC landscape and put forward its ideas as to how both forms of provision can be encouraged. After all, they are both set up to deliver a known retirement income directly, which, financially, is what those who have reached a certain age need above all else.
Sign up to receive our weekly bulletin
Subscribe to LCP emailsThis Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
If you would like to receive the weekly pensions bulletin automatically by email please fill in this form.