Pensions Bulletin 2025/50

Government to develop statutory guidance on trustees’ investment duties 

During the Report stage debate on the Pension Schemes Bill, the Pensions Minister, Torsten Bell said, in response to a proposed new clause on trustees’ investment duties being put forward by Labour MP Liam Byrne, that the Government would instead “bring forward legislation that will allow the Government to develop statutory guidance for the trust-based private pensions sector”. 

Mr Byrne’s clause, which had the support of 33 other MPs, and which was not put to the vote, would have allowed trustees to include a range of factors when interpreting the best interest or sole interests of member and beneficiaries when making investment decisions. These factors comprise: 

• “system-level considerations” (expected to include climate change); 
• the “reasonably foreseeable impacts over the appropriate time horizon” of assets or organisations in which the pension scheme invests, including upon members' and beneficiaries' standards of living; and 
• the views of members and beneficiaries. 

We understand that this clause has been developed by ShareAction (a responsible investment charity), with the assistance of two senior pension lawyers and had been consulted on extensively with industry stakeholders. 

Torsten Bell thought that “rather than hardwiring” the above clause into primary legislation “there are advantages to consulting more fully and retaining an ability to be responsive to future developments” and so he favoured an approach of enabling legislation on which statutory guidance would be built. On the guidance he said that it will encapsulate the factors set out in the clause, with the goal being to provide practical support to trustees about how to comply with their existing duties in considering these factors, including what is meant by systemic risks and standards of living. 

Torsten Bell “hopes to bring forward clarity on the next steps in a matter of months”. 

Pension Schemes Bill moves to the House of Lords 

Following the conclusion of its House of Commons’ stages on 3 December 2025 the Pension Schemes Bill had its First Reading in the House of Lords on 5 December 2025 with its Second Reading scheduled for 18 December 2025. The Bill itself has been updated to reflect all amendments made at Report and Third Reading in the Commons. 

Finance Bill – pensions aspects in detail 

Last week’s Pensions Bulletin was published on the same day as The Finance (No. 2) Bill and given this we said that we would provide a full report on the pensions aspects of the Bill this week. There are three topics as follows: 

Inheritance tax on unused pension funds and death benefits 

Clauses 63-68 bring unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes in relation to deaths on or after 6 April 2027. This new law applies to registered pension schemes, a qualifying non-UK pension scheme and a section 615 scheme.  

Clause 63 creates the concept of “notional pension property” for inheritance tax purposes, being the sum of the value of each money purchase arrangement and each defined benefits arrangement for each scheme in turn relating to the deceased. However, an “excluded benefit” is ignored for this purpose and this includes a dependant’s scheme pension, a trivial commutation lump sum death benefit, and a dependants’ annuity or a nominees’ annuity that was purchased together with a lifetime annuity payable to the member. Certain other benefits in respect of individuals who were active members immediately before death are also excluded but it is not clear what they are intended to cover. 

Clause 64 sets out the inheritance tax liability for the above “pension interests” following a member’s death. It ensures that personal representatives are responsible for paying any inheritance tax due on the deceased’s pension interests. Given that such personal representatives will not be able to gather in these pension interests, unlike other parts of the deceased’s estate, it provides that where the personal representatives pay the tax, they are to be repaid by the person in whom the property is vested, which will usually be the trustees as the scheme administrator. It also provides that pension scheme administrators are liable for such inheritance tax when they have failed to comply with a notice given by the personal representative, or where they do not pay the tax within 35 days of being asked to pay by a beneficiary or the personal representative.  

Clause 65 provides for the personal representative to request the pension scheme administrator to withhold paying benefits to beneficiaries of up to 50% of their entitlement where certain conditions are met. This is to ensure that benefits are not fully paid out whilst there is an inheritance tax liability to settle. It also provides for pension beneficiaries and personal representatives to request that the pension scheme administrator pay their inheritance tax liability directly to HMRC where certain conditions are met. 

Clauses 66 to 67 make connected amendments to the Inheritance Taxes Act 1984 and to the income tax rules respectively whilst Clause 68 provides for all of the above to have effect for deaths and, so far as relevant, other transfers of value on or after 6 April 2027. 

Collective money purchase schemes  

Clause 57 sets out when HMRC is able to refuse to register, or to remove registration from a pension scheme that is a collective money purchase scheme. It also makes consequential changes to the definition of a Master Trust scheme and gives HMRC the power to make regulations to amend or modify the pensions tax legislation set out in the Finance Act 2004 in relation to a collective money purchase scheme. 

Tax advisers  

Clauses 220-250 along with Schedules 19-21 introduce new registration and conduct requirements for tax advisers. Schedule 19 sets out the exceptions to the registration requirement, and although there is not an explicit exception for pension scheme administrators (see Pensions Bulletin 2025/48), the exception “where the adviser interacts with HMRC in order to comply with an obligation of the adviser under any enactment” will hopefully result in most pension scheme administrator dealings with HMRC being excepted although this is not certain. 

Regulator intervenes in corporate restructuring case

The Pensions Regulator has published details of the outcome it secured, following its intervention, for over 13,000 members of the Northern Foods Pension Scheme, which it says will help the underfunded DB scheme achieve self-sufficiency over the next decade. 

Details are set out in a regulatory intervention report which tells the story of the 2011 acquisition of the scheme sponsor by a private company, the acquisition being financed by the issue of corporate bonds, and a weakening in the scheme’s direct covenant as a result of disposals of parts of the acquired business between 2018 and 2020 to assist with the refinancing of the bonds (in which the scheme received only a small share of the proceeds). 

The Regulator opened an avoidance case following these disposals as it was concerned that the scheme was not being treated fairly compared to other stakeholders. In July 2024 it issued a warning notice under section 43 of the Pensions Act 2004, seeking formal financial support from the business owner, an associated entity, together with several subsidiary companies of both entities. As a result of the Regulator seeking to issue a Financial Support Direction, a joint support package was agreed whose key features were a minimum level of contributions over around a ten-year period, a replacement of the scheme’s sole statutory employer with a significantly stronger entity and stronger and additional guarantee arrangements (albeit unsecured and ranking behind the group’s debt). 

The Regulator says that by working with the scheme’s trustee, the employer’s parent company and associated businesses, they achieved more support both from the group which owns Northern Foods and the private company. Along with the scheme’s trustee, the Regulator believes the likelihood of the scheme’s members receiving their full benefits has substantially increased. The Regulator also notes that the buyout deficit has reduced from approximately £1bn at 31 March 2019 to £372.1m on 31 March 2025. 

The Regulator concludes by making a general point that where corporate transactions take place and the pension scheme is impacted, it is vital that the pension scheme is treated equitably compared with other stakeholders. 

Government legislates for pensions salary sacrifice cap

Following on from the announcement made at the Budget (see Pensions Bulletin 2025/48) a three-clause Bill that creates a power for the Treasury to lay regulations that will apply an employer and employee National Insurance contributions charge from 6 April 2029 where employer pension contributions that exceed £2,000 pa are made via salary sacrifice arrangements has been laid before Parliament. 

The Bill in effect provides, via the optional remuneration arrangements law, that where an employer pension contribution has arisen as a result of salary sacrifice, regulations may treat the sacrifice, but only above a contributions limit, as remuneration derived from the earner’s employment. This has the result that whilst the employer pension contribution will continue to not attract income tax despite being a benefit in kind, that part of the sacrifice above the contributions limit will be treated as earnings for NIC purposes. 

The National Insurance Contributions (Employer Pensions Contributions) Bill had its First Reading on 4 December 2025. HMRC also published a tax information and impact note the same day. From both it is apparent that the first regulations under this power must set the contributions limit at £2,000 pa (with equivalent limits for weekly, monthly and other pay periods), but this limit can be subsequently varied.  

The Bill’s Second Reading is scheduled for 17 December 2025. 

Purple Book shows DB schemes’ funding positions remain strong

The Pension Protection Fund has published the 20th edition of its Purple Book, setting out its regular comprehensive analysis of the UK’s DB pension landscape and so the risk being presented to the PPF that would crystallise should scheme sponsors fail.

Once again, the number of schemes has fallen over the year due to schemes winding up, merging, or entering PPF assessment – dropping to 4,838 at 31 March 2025 from 4,969 at 31 March 2024. This compares to 7,751 schemes at 31 March 2006. And, likely reflecting at least in part there being fewer schemes, total DB universe assets fell from £1,167.1bn at 31 March 2024 to £1,068.1bn at 31 March 2025. 

A few key funding highlights from this year’s Purple Book include: 

• The overall section 179 funding ratio increased from 123.1% at 31 March 2024 to 125% at 31 March 2025. The overall buyout funding ratio also increased from 94.4% at 31 March 2024 to 95.8% at 31 March 2025. 
• The overall section 179 funding position reduced from a surplus of £219.2bn at 31 March 2024 to a surplus of £213.9bn at 31 March 2025. The overall buyout funding position improved from a deficit of £69.5bn at 31 March 2024 to a deficit of £47.2bn at 31 March 2025. 
• The section 179 deficit of schemes in deficit worsened from £20.9bn as at 31 March 2024 to £21.8bn at 31 March 2025.

Other topics on which the Purple Book reports include scheme demographics, insolvency risk and asset allocation.

Pensions Regulator to examine barriers to investment in private markets and infrastructure 

The Pensions Regulator has announced that it has launched an initiative to explore the approach of both DC and DB pension schemes to investing in private markets and infrastructure which it says “could boost returns for savers over the long term”, and to better understand the barriers to doing so. 

The Regulator says that currently it is using its sector insights to understand the range of market opportunities and investment vehicles available to pension schemes, their limitations, barriers and enablers, with an emphasis on UK investment opportunities. It is also focussing on those schemes, with material scale, which may be considering or have the potential to make investments in this area. 

The Regulator plans to complete this work by the end of 2025. It will share findings with Government and publish a market oversight report in 2026. 

The Regulator also says that it expects trustees to acquire the skills, capabilities and access to professional advice to consider investing in diversified portfolios and where such schemes fall short, it will be asking trustees to consider whether it would be in savers’ interests to consolidate into larger vehicles with greater investment capabilities. 

Pensions Regulator updates its scheme administration guidance 

The Pensions Regulator has published revised scheme administration guidance which it says provides practical steps for governing bodies to ensure high-quality administration that meets regulatory expectations (as set out in the administration module of the Regulator’s General Code). The new guidance replaces the Regulator’s previous Administration of a DC Pension Scheme guidance and applies to all scheme types and follows the Regulator’s recent data quality market oversight report (see Pensions Bulletin 2025/46). 

The Regulator says that the guidance aims to protect members by ensuring accurate, timely and secure administration of pension benefits and good member services. It is also intended to promote robust planning and reduce risks of errors, delays, and breaches.

The Regulator expects schemes and administrators to refer to this guidance regularly to ensure they are following good administrative practices – pointing out that it provides important information on maintaining an administration IT system and that it signposts trustees to the Regulator’s cyber security guidance. 

The Regulator also says that the guidance provides clearer clarifications on key administration activities and considerations, specifically around member communications, data management, disaster recovery and business continuity planning. It also introduces several new elements such as: 

• The importance of having a policy to plan administration and having robust arrangements in place to enable the effective oversight of outsourced or inhouse administration. 
• Guidance on IT system governance, including assurance on system adequacy, change control processes, technological benefits with proper oversight, and regular backups; and linked up with the Regulator’s cyber security guidance. 
• Performance measurement broadened beyond time-based commitments for true reflection of the quality and accuracy of the administration service. 

In wrapping up its launch the Regulator says that governing bodies should use the guidance as a practical framework to strengthen administration, improve oversight, and build effective partnerships with administrators. 

Stagecoach pension scheme has a new sponsor as part of an innovative transaction

The Aberdeen Group has announced to the London Stock Exchange that it has agreed to become the sponsoring employer of the Stagecoach Group Pension Scheme, taking over from the Stagecoach Group who wanted a “clean break” from their large DB scheme as part of simplifying their business. 

The scheme benefits from a strong surplus position and will now be able to continue to run on and is expected to grow surplus to increase members' benefits. As part of the deal, members will benefit from an initial uplift to all benefits. 

In addition to taking on responsibility for the scheme's funding through being the sponsoring employer, Aberdeen will also take on the management of the scheme's assets. Aberdeen will receive a minority share of any future distributed surplus with the majority earmarked for members. 

This development follows Aberdeen's decision earlier this year to run on its DB pension scheme, with surplus unlocked for the benefit of Aberdeen and the scheme's members.