Pensions Bulletin 2025/49

Government tables amendments to the Pension Schemes Bill 

The Pension Schemes Bill started its Report stage in the House of Commons on 3 December 2025, and ahead of this numerous Government amendments were tabled. In this article we report on the more significant Government amendments set out in the 3 December 2025 amendment paper.

Funding of the PPF Ombudsman put on proper footing 

The Pensions Ombudsman, whose office long predates the establishment of the PPF, also acts as an Ombudsman for the PPF Board. NC30 enables the PPF Ombudsman’s expenditure to be paid from money raised by the general levy and removes the power to impose a separate levy to meet this expenditure. 

Gov 89 provides that this funding change, which has in practice been in operation since 1 April 2007, is treated as having had effect since that date. 

PPF and FAS – indexation for pre-1997 service delivered 

NC31 (GB) and NC32 (NI) make provision for certain compensation paid by the Pension Protection Fund in respect of a person’s pre-1997 pensionable service to be increased annually. The legislation is not straightforward as it is having to build on and adjust existing complex compensation provisions, but in essence, such pre-1997 indexation will apply in two situations: 

• if the original scheme provided increases to pre-1997 pension that was in addition to any GMP increase, then the whole pre-1997 compensation will receive indexation; 
• if the original scheme only provided increases to post-1988 GMPs, then a percentage (to be determined by regulations) of pre-1997 compensation will receive indexation. 

Provision is also made so that, if it is not clear to the PPF whether these increases applied in the original scheme, indexation will apply to the whole of, or a percentage of, the pre-1997 compensation as if such increases had applied.  

NC33 makes similar provision for certain assistance paid under the Financial Assistance Scheme Regulations 2005 in respect of a person’s pre-1997 pensionable service to be increased annually. As with the increases applied to the PPF compensation, the FAS indexation will apply where the original scheme provided increases to pre-1997 pension in addition to any GMP increase, and where the original scheme only provided increases to post-1988 GMPs, with different approaches applying to each. 

In both cases, the indexation on pre-1997 compensation is not backdated.  

Gov 87 provides that the new clauses inserted by NC31, NC32 and NC33 (which are intended to form a new Chapter in Part 4 of the Bill) come into force on such day as the Secretary of State may by regulations appoint. They are expected to operate from January 2027 when the first such pension increases will be granted.  

Local Government Pension Schemes – exemption from public procurement rules 

NC34 amends the Procurement Act 2023 to create a new category of exempted contract covering investment management contracts between a local government scheme manager and the asset pool company where certain conditions are met. This is intended to replace Clause 4 in the Pension Schemes Bill. 

Ending of the PPF administration levy 

NC35 enables administrative expenses of the Pension Protection Fund Board to be paid out of the Pension Protection Fund and the Fraud Compensation Fund and removes the existing PPF administration levy mechanism. It also clarifies that no administration levy is payable for 2023/24 or 2024/25. Gov 88 provides that this funding change has effect from 1 April 2026. 

This has long been called for, and came into focus when, earlier this year, the Pensions Regulator sent out invoices for the 2025/26 administration levy (see Pensions Bulletin 2025/27) despite the Pension Protection Fund being in substantial surplus.  

Small DC pots consolidation – switch to federated model  

Gov 24-36 make a number of changes to the small dormant pension pots consolidation requirements. Many relate to removing the concept of “the small pots data platform operator” as the mechanism now envisaged is potentially many different persons operating as “destination proposers” (see Pensions Bulletin 2025/37). In particular, Gov 28 ensures that the task of proposing destinations for small dormant pots may be undertaken by different persons and defines such persons as “destination proposers”. 

Interestingly, Gov 31 adds the Secretary of State to the list of persons who can be required to pay compensation for mistakes made operating the small pots regime. 

Meeting the DC scale requirement through connected schemes  

Gov 37-53 make numerous amendments to the scale requirements with the main focus being to ensure that the assets of connected schemes are included when testing whether a particular scheme has met the scale requirements. The most significant amendments include the following: 

• Gov 42 ensures that, when determining whether a Master Trust has sufficient assets to be approved as meeting the scale requirements, the assets of connected Master Trusts are included. 
• Gov 44 enables regulations to set out the relationship that must exist between the Master Trust and other Master Trusts or group personal pension schemes, for their assets to be pooled for the purposes of being approved as meeting the scale requirements. 
• Gov 49 enables regulations to set out the relationship that must exist between the group personal pension scheme and other group personal pension schemes or Master Trusts, for their assets to be pooled for the purposes of being approved as meeting the scale requirements. 

In relation to the above regulations, amongst other things, they may provide that Master Trusts are connected if they share the same scheme funder or scheme strategist, group personal pension schemes may be connected if they share the same provider, and Master Trusts and group personal pension schemes may be connected if the scheme funder or scheme strategist of the Master Trust is also the provider of the group personal pension scheme.  

Virgin Media resolution mechanism adjusted 

Gov 55-84 and Gov 86 make numerous amendments to the proposed legislation for GB and NI schemes (see Pensions Bulletin 2025/35) whose purpose is to enable schemes that were contracted out on a salary-related basis to resolve the legal uncertainty that may have arisen following the Virgin Media case.

Looking at the amendments impacting GB schemes (Gov 55-66), many are of the nature of tidying up and tightening of the proposed legislation. The more significant changes include the following: 

• Gov 58 – narrowing the scope of the second leg of the “positive action” exclusion from potential remediation so that a step in relation to the administration of the scheme other than that in the first leg will only result in a “positive action” exclusion if the trustees have notified in writing any scheme members to the effect that the trustees are taking (or have taken) that step. 
• Gov 59 – reworking the three “legal proceedings” exclusions from potential remediation, as part of the clarification of which such proceedings are to count for this purpose. Helpfully, “legal proceedings” are also now defined, as proceedings before a UK court the parties to which are or include both the scheme trustees and beneficiaries or their representative. This should have the effect of ensuring that Pensions Ombudsman cases and professional negligence actions don’t result in the remediation facility being denied.  
• Gov 64 – expansion of the deemed validity provision applying to a scheme that has wound up before the provisions come into force so that it also includes a part of a scheme that has similarly wound up. 
• Gov 65 – expansion of the deemed validity provision applying to a scheme for which the PPF Board has assumed responsibility before the provisions come into force so that it also includes a part of a scheme for which the PPF Board has assumed responsibility. 

Gov 86 brings forward the commencement date of these provisions from two months after the date of Royal Assent to the date of Royal Assent to the Bill. 

Finance Bill – pensions aspects 

As we go to print, the Finance (No. 2) Bill is expected to be published following the House of Commons’ decisions on the Budget Resolutions that were published on 26 November 2025. In addition, an HMRC policy paper, first issued on 1 December 2025, has been updated to set out the topics that will be covered by the Bill and those measures announced at the Budget that will not be in the Bill. 

Topics to be covered that are relevant to pension schemes are as follows: 

• Enabling unconnected, multiple employer collective money purchase schemes to apply to HMRC to become registered pension schemes and allow HMRC to refuse to register or to de-register unauthorised collective money purchase schemes. Also providing HMRC with powers to make regulations to efficiently support the development of collective money purchase schemes. 
• Bringing unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes from 6 April 2027.
• Modernising and mandating tax adviser registration from May 2026. 

Legislation to enable DB schemes to make direct payments of surplus assets to individuals over normal minimum pension age will be contained in the Finance Bill 2026/27. 

Legislation to cap the national insurance contributions’ advantages of pensions salary sacrifice will be introduced through primary and secondary legislation in due course. 

We hope to be able to provide a full report on the Finance Bill in next week's Pensions Bulletin.

HMRC issues Pension Schemes Newsletter 175 

HMRC’s Pension schemes newsletter 175, published the day after the Budget, inevitably starts with those Budget announcements made in connection with tax-relieved pension savings. In this article we focus on those aspects which appear to provide further detail on the Budget announcement. 

Autumn Budget announcements 

• On the registration and other aspects relating to collective money purchase schemes (see Pensions Bulletin 2025/48), HMRC says that the regulation-making power will have effect on and after the date of Royal Assent to the Finance Bill 2025. However, the provisions relating to unconnected, multiple employer schemes (UMES) will be operational only after the DWP’s UMES legislation (see Pensions Bulletin 2025/43) has taken effect. 
• On defined benefit surplus payments to individuals (see Pensions Bulletin 2025/48), HMRC says that the legislation that will enable direct payments of surplus assets to members or other beneficiaries will provide that such payments are treated as authorised payments and taxed as pension income at the individual’s marginal rate of tax. HMRC goes on to say that schemes will need to be in surplus on the same funding basis as applies to payments to employers.

Separately, in a letter to the Work and Pensions Committee from the Pensions Minister, it is confirmed that the DWP is working with the Pensions Regulator regarding how to support schemes considering using the proposed new surplus release powers, the Regulator intends to release further guidance on the release of surplus – expected to outline key considerations when releasing surplus and provide illustrative examples of how members can benefit from surplus sharing - by the end of 2027, and the DWP aims to consult on standards of governance and trusteeship before the end of 2025. 

• On the change to aspects of the forthcoming inheritance tax on unused pensions and death benefits (see Pensions Bulletin 2025/48), HMRC says that if personal representatives “reasonably expect” inheritance tax to be due they can direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of death. Personal representatives can then direct pension scheme administrators to pay the inheritance tax due to HMRC from the benefits that have been withheld before the scheme releases the rest of the benefits to the pension beneficiaries. 

HMRC goes on to say that the remaining funds can be paid out if either the withholding instruction is withdrawn or the withholding period ends. HMRC also says that the ability to withhold will not apply to exempt beneficiaries, benefits under £1,000 or continuing annuities. Finally, HMRC says that personal representatives will be discharged from liability for any pensions which are discovered after they have received clearance from HMRC. 

• On salary sacrifice reform (see Pensions Bulletin 2025/48), HMRC says that it will engage with industry and employers on the design and operability of the cap and will legislate in a National Insurance Bill in due course. Separately, it is being reported that legislation, separate to the Finance Bill, dealing with salary sacrifice reform will be introduced in the “next few weeks”, despite it not expected to be operational until April 2029. 

The Autumn Budget article is rounded off with a request, in the context of pre-Budget speculation, to remind scheme members that early access to pensions is rarely in anyone’s long-term financial interests and can carry tax charges of more than half the unauthorised payment. HMRC says that members should get suitable professional advice, including from a regulated financial adviser and asks that those who identify any new schemes entering the market that propose access to pension savings in a manner that raises concerns email HMRC. 

Other matters 

The newsletter concludes with two articles, the first of which highlights the recently renamed “Check your pension protections and enhancements” service through which individuals can view all protection and enhancements online and submit amendments to some protections online. Applications and amendments for enhancements will remain paper based. 

The second announces that later in 2025 a new feature will be available on the Managing pension schemes service that will allow the reporting of a transfer to a qualifying recognised overseas pension scheme (QROPS).  

Pensions Regulator CEO speaks to driving better outcomes for pension savers

The Pensions Regulator has published the text of a speech that its CEO Nausicaa Delfas gave at a conference on the subject of “delivering a modern regulatory system that drives better outcomes for savers” – a speech delivered in the context of the Pension Schemes Bill and the work being undertaken by the Pensions Commission.

In her speech she emphasised three priority areas: higher standards of governance, a robust value-for-money framework, and clearer retirement income solutions. Taking each in turn: 

• On governance she said that trustees should prepare for increased expectations around professionalism, data quality, cyber resilience and administration, especially as consolidation accelerates and schemes grow in scale and complexity. 
• On the value-for-money regime for DC schemes that is currently being legislated for, she said that this is expected to drive improvements in investment performance, service quality and transparency, with underperforming schemes expected to improve or consolidate. The Regulator also encourages broader and more diversified investment strategies, including greater capacity for UK-focused and alternative assets, where appropriate for members. 
• On DC decumulation, the Regulator is working with the Government and other regulators to introduce a default retirement income pathway to address the fact that most savers currently reach retirement without a clear plan. Trustees will need to begin evaluating and designing suitable retirement income solutions well ahead of new duties coming into force. 

Internally, the Regulator is shifting towards “smarter regulation” — streamlining reporting burdens, prioritising outcomes over process, and launching an innovation service (see Pensions Bulletin 2025/20) to support safe testing of new products. 

She concluded by saying that governance, value, and retirement outcomes must all improve, and trustees should begin preparing now for a more demanding but more supportive regulatory environment.

Pensions Regulator urges trustees and administrators to make the Pledge to combat pension scams

To mark the fifth anniversary of the Regulator’s Pledge to combat pension scams campaign (see Pensions Bulletin 2020/46), Paul Sweeney, who is the Pension Scams Action Group Intelligence Business Lead has blogged as part of the launch of a new Pledge campaign, marking the significant progress industry has made so far, what still needs to be done and the way ahead. 

The new pledge to combat pension scams that he links to comprises three steps – the Pledge itself (which comprises three principles – know the warning signs, educate your members and report to Action Fraud), self-certification that action has been taken to meet the Pledge and a request to “Go further” which seems to be to follow the guidance in the PSIG Combating Pension Scams Code of Good Practice. 

DWP issues latest benefit and pension rates

The Department for Work and Pensions has issued a list of the benefit and pension rates that will operate from 2026 to 2027 following their annual uplift. These include the following: 

• The new State Pension – which increases from £230.25 pw to £241.30 pw; 
• The old Basic State Pension – which increases from £176.45 pw to £184.90 pw; 
• The standard minimum guarantee of the Pension Credit – which increases from £227.10 pw to £238.00 pw for single people and from £346.60 pw to £363.25 pw for couples. 

At the Budget the Government stated that pensioners whose sole income is the basic or new State Pension will not have to pay small amounts of tax via Simple Assessment from 2027/28 if their state pension exceeds the Personal Allowance from that point (see Pensions Bulletin 2025/48). The Chancellor has now clarified that such individuals will not have to pay income tax and that this will remain the case for the duration of this Parliament.

State pension transitional protection increases put through 

Two sets of regulations have been laid which for those reaching State Pension Age on or after 7 April 2025: 

• Increase that part of any transitional new State Pension, which when calculated as at 6 April 2016, was above the then full rate (the “protected payment”), by the increase in the CPI (so by 39.0% for the ten-year period ending on 5 April 2026); and 
• Increase that part of any pension debit or credit on divorce, that has been applied to such a “protected payment”, by the increase in the CPI since the debit or credit was created on or after 6 April 2016. 

The State Pension Revaluation for Transitional Pensions Order 2025 (SI 2025/1219) and The State Pension Debits and Credits (Revaluation) Order 2025 (SI 2025/1220) come into force on 6 April 2026 for most purposes. 

PASA and the Data (Use and Access) Act 2025 

The Pensions Administration Standards Association has issued a short paper that highlights implications for pension schemes of the Data (Use and Access) Act 2025 and the accompanying Information Commissioner’s Office materials. 

PASA says that whilst the Act, which introduces significant modifications to the UK’s data protection landscape, is not bespoke to pensions, it directly affects scheme governance, saver experience, data operations, and risk management across the saver journey. 

The short paper is in six sections each of which sets out an area that schemes need to understand and act upon. 

PDP looks at various aspects of benefit illustration production 

The Pensions Dashboards Programme has published supplementary guidance on benefit illustrations, which is intended to support industry understanding on various aspects of such illustrations. Although the guidance currently supplements the compulsory data standards, elements of this guidance are to be incorporated into the data standards at the next available opportunity.