Pensions Bulletin 2025/42

Government moves forward on CDC provision 

On 22 October 2025 the Government announced that it would lay regulations the following day that will allow unconnected multiple employer (UMES) collective defined contribution schemes to be established. This follows a consultation on draft regulations which closed in November 2024 and which in April 2025 the Government gave the green light to (see Pensions Bulletin 2025/17). So far, legislation only enables single-employer CDC schemes to be established.  

A separate policy consultation on “Retirement CDC” was also launched, which would allow people who have saved into a DC scheme to transfer their pension pot into a CDC scheme at retirement. The aim of this facility is to see more people receive a regular income for life that aims to keep up with rising prices without having to worry about managing their retirement money themselves or working out how long their savings need to last. 

Price inflation and earnings figures set the scene for next year’s pension increases 

On 22 October 2025 the Office for National Statistics announced that the Consumer Prices Index (CPI) had risen by 3.8% over the 12 months to September 2025. Over the same period the Retail Prices Index rose by 4.5%. On 14 October 2025 the ONS released its latest earnings figures, which amongst other things contained a confirmation that the KAC3 average weekly earnings data (total pay, seasonally adjusted) for the three months to July 2025 was a 4.8% increase on the same figure 12 months prior. 

These announcements set the scene for the calculation of a number of pension increases next year. 

State pensions 

We understand that the KAC3 figure above is what the Department for Work and Pensions ordinarily uses to determine the earnings element of the state pension “triple lock”. So, assuming the triple lock formula continues to operate in full, the earnings element of 4.8% should drive next April’s increases, being higher than the CPI figure of 3.8% and the fixed 2.5%. Therefore, the Basic State Pension (currently £176.45 pw) and the full rate of the Single Tier State Pension (currently £230.25 pw) should increase in April 2026 by 4.8% and become £184.90 pw and £241.30 pw respectively. 

SERPS and S2P entitlements in payment should increase by 3.8% next April. 

In an answer to a Parliamentary question the Government has confirmed that this year’s uprating review of state pensions will conclude at the end of November 2025. 

Occupational pensions 

Next year, schemes that use September CPI as a reference point and apply the Limited Price Indexation rules to pensions in payment will have to increase them by at least 3.8% for the pension that accrued between 6 April 1997 and 5 April 2005 (which is subject to a 5% cap) and at 2.5% for the pension that accrued after 5 April 2005 (as this is subject to a 2.5% cap).  

GMPs that accrued after 5 April 1988 should also increase next year by 3.0%, as the 3% ceiling constrains an increase that would otherwise be in line with the increase in the CPI. 

For pensions in deferment, the statutory minimum uses September inflation as a reference point and the revaluing of any pension in excess of GMP will reflect the CPI of 3.8%, but subject to how the 5.0% cap applies for deferred pensions that accrued prior to 6 April 2009 and how the 2.5% cap applies for deferred pensions that accrued after 5 April 2009. These caps operate over the whole period of deferment and so whether the full 3.8% is reflected in an individual’s revaluation will depend on the course of inflation over the whole period of their deferment.  

The above comments relate to statutory minima. Many schemes will have increases in their rules that are in excess of this and some will use different inflation reference months. 

Pensions tax 

For members accruing defined benefits or cash balance, the September-to-September CPI is key to annual allowance calculations. The 3.8% increase in the CPI is effectively the inflation allowance made before the annual allowance starts to be used up in the 2026/27 tax year. 

Capita fined for data breach that also impacted pension records

The Information Commissioner’s Office has announced that the Capita group has been fined £14m in total for failing to ensure the security of personal data related to a cyber-attack that took place in March 2023 resulting in the personal information of 6.6m people being stolen, from pension records and staff records to the details of customers of organisations Capita supports. 

The ICO says that of the 600 organisations providing pension schemes on behalf of which Capita Pension Solutions Limited processes personal information, 325 of these organisations were also impacted by the data breach. The ICO goes on to summarise the cyber-attack and set out Capita’s failings. 

The ICO was intending to raise a £45m fine, but following representations made to it by Capita, agreed a voluntary settlement in which Capita acknowledged the ICO’s decision and admitted liability, agreeing to pay a final penalty of £14m without appealing. 

We last reported on this issue in February 2024 (see Pensions Bulletin 2024/05) when the Pensions Regulator published a regulatory intervention report providing details of the breach and how it impacted pension schemes and their members. 

The Government’s overhaul of the UK’s regulatory system – six months on

With over six months having now passed since the Government announcing in February 2025 its plan to reform the UK’s regulatory system to support its Industrial Strategy and wider growth mission (see Pensions Bulletin 2025/11), the Chancellor has announced similar action in this area, but with much more colourful language. 

Despite using phrases in its news story such as a “blitz on business bureaucracy”, “slashing red tape and regulations”, “scrapping pointless paperwork” and a “crackdown on needless form-filling”, what has actually happened is the publication of some documents showing progress to date by various regulators and promised next steps. 

The Pensions Regulator made a number of pledges back in February, on which it expanded in March (see Pensions Bulletin 2025/13). The Annex B update now provided in the March-published action plan page shows the progress that it (and other regulators) have made, little of which will be a surprise.  

We are now promised publication of the findings of the Regulator’s review of Master Trust capital reserving by December 2025 with presumably some relaxation from the current requirements being announced. 

There will also be a consultation in December 2025 on reforms to the value for money framework and the publication of guidance to support the consolidation of smaller DC schemes where it is in savers' best interest to do so – this is presumably to fill in the detail of the principles outlined in the Pension Schemes Bill currently going through Parliament. 

The Government intends that by the end of this Parliament it will have delivered a 25% cut in regulatory costs. A new Annex A sets out the methodology, assumptions and data sources to assist in measuring this. The Pensions Regulator does not get a single mention.

ABI reports on progress with the Mansion House Compact

The Association of British Insurers has announced that signatories of the Mansion House Compact “have maintained steady progress on their ambition to increase pension investment into unlisted equities and deliver long term value for savers.” 

Under this voluntary initiative, launched in July 2023 by the previous Government (see Pensions Bulletin 2023/28), signatories (of which there are currently 11) committed to an objective of allocating 5% of assets in their DC scheme default funds to unlisted equities by 2030. The ABI is now reporting that by the end of the second year of the Compact’s existence, investment in unlisted equities held through DC default funds has increased from 0.36% to 0.6%, which the ABI says marks further progress towards the Compact’s ambition to allocate at least 5% by 2030. 

The Mansion House Compact is not to be confused with the Mansion House Accord launched in May 2025 by the then Pensions and Lifetime Savings Association (see Pension Bulletin 2025/19). This includes a broader set of asset classes and contains a UK specific ambition. 

Sterling 20 group launched to drive regional growth and investment by pension funds

The Government has announced that 20 of Britain’s largest pension providers and insurers have launched the Sterling 20 group at the Regional Investment Summit in Birmingham this week. This group is intended to build on the Mansion House Accord (see Pension Bulletin 2025/19) and will work with the Office for Investment. All 17 signatories of the Accord, alongside annuity providers Rothesay and PIC, and the Pension Protection Fund have signed up to form the Sterling 20.

The Government said that the Sterling 20 is “a new investor-led partnership… working with the government and City of London Corporation to channel the nation’s savings into key infrastructure and fast-growing businesses in key modern Industrial Strategy sectors like AI and fintech.”

The initial steps of this investment drive include L&G committing £2bn by 2030 to deliver 10,000 more affordable homes and supporting the creation of 24,000 jobs nationwide. Additionally, Nest will provide £100m to be channelled into UK investments in the coming years as well as investing £40m to deliver gigabit-capable fibre broadcast to remote areas in Scotland and Northern England.

The Regional Investment Summit will also see the AustralianSuper, Australia’s largest pension fund, increase its investment into the UK housing market.

Pensions Regulator publishes results of DB scheme survey 

The Pensions Regulator has published a report that sets out the findings from a telephone survey of 200 DB pension schemes conducted by OMB Research in March 2025 (and is the equivalent of the recent DC survey about which we reported in Pensions Bulletin 2025/41).  

The report, which can be found in the DB section of the Regulator’s Research and analysis page, covers a number of topics including long-term planning, consolidation, surplus release, pension scams, cyber security, administration, and capabilities in relation to climate-related risks/opportunities and diversified investments. 

Amongst the findings are the following: 

• 93% of schemes had a long-term objective, with 58% intending to buy-out liabilities with an insurance company and 31% running on with low dependency on the employer. Only 6% aimed to run on and generate a surplus. 
• Although only 1% of schemes had a long-term objective of entering a commercial consolidator vehicle, 27% of trustees described consolidation as an attractive option for their scheme. 
• 53% of schemes said their trustee boards had concerns about the Government’s proposals to lift restrictions on how DB schemes can release surplus funds, 38% said that they had no concerns and 9% did not know. 
• 97% of schemes felt their processes for detecting and preventing transfer scams were effective, with 82% describing these as ‘very effective’. 
• Only 17% of trustee boards treated ESG as a high priority in comparison to their other responsibilities, and 57% saw their fiduciary duty as a barrier to investing in a net zero economy (although only 16% saw it as a “significant barrier” with the rest describing it as a “minor barrier”).
• Schemes with a professional trustee reported higher standards of governance and administration in some areas and were less likely to have considered releasing surplus than those with no professional trustees. 

So far the Regulator has chosen not to publicise or otherwise comment on the report’s findings.

Government to index pre-1997 PPF and FAS accruals? 

A rather curious exchange in Parliament suggests that the Government is getting close to moving an amendment to the Pension Schemes Bill that will provide for some form of indexation for pre-1997 pensions accruals within the Pension Protection Fund and the Financial Assistance Scheme. Replying to a written question from Alex Easton MP (Independent) about amending the Pension Schemes Bill to allow the PPF to be amended through secondary legislation, Pensions Minister Torsten Bell said that the Government is committed to “actively consider and reflect” on what is “an important issue for affected members”. 

This comes after the PPF said that it “continues to prioritise supporting the Government’s consideration of PPF indexation levels” when it announced the zero levy last month (see Pensions Bulletin 2025/38). 

Separately and ahead of Report Stage, Plaid Cymru MP, Ann Davies, has tabled an amendment to the Pension Schemes Bill providing for such pre-1997 rights to be indexed. Other MPs have also tabled amendments on the issue.  

And in other Parliamentary Questions

A substantial number of Parliamentary questions on pensions topics have been answered recently. These include the following: 

• Independent advice on transfers – in response to a question on the merits of indexing the £30,000 threshold over which independent advice must be sought before a DB pension is transferred, Torsten Bell said that raising it could “increase the risk of transfers being made without sufficient understanding” before going on to say that in the coming months the Government intends to consult on the outcome of work being undertaken in this area following a 2023 review (see Pensions Bulletin 2023/46). 
• Trustee governance – Torsten Bell confirmed that the promised DWP consultation (see Pensions Bulletin 2025/18) will launch later this year and will cover trust-based pension scheme governance, professional and sole trustees, accreditation and skills, member voice and supporting lay trustees. 
• Pensions tax – in response to a question about one particular shortcoming of the pensions tax legislation relating to the abolition of the Lifetime Allowance Torsten Bell confirmed that the scheme-specific lump sum calculation is not operating as intended for those with certain forms of transitional protection, including those with enhanced protection, and that HMRC intends to bring forward legislation to address this issue by April 2026. This would appear to relate to the legislation on which HMRC said, in its Newsletter 173 (see Pensions Bulletin 2025/39), that it would consult on before laying before Parliament.