Pensions Bulletin 2025/51

This is the last Pensions Bulletin for 2025

Well, what a year it has been on the pensions regulatory front, with much to report on, including the introduction and progress with the Pension Schemes Bill, the changing details of inheritance tax on unused pension funds and death benefits that is to apply to deaths after 5 April 2027, and those pre-Budget pensions rumours that largely came to nothing – to name just three areas we have covered in LCP’s weekly Pensions Bulletin.

This is the last edition for 2025. We will return after the Christmas and New Year break, probably on 8 January 2026. If you are not being alerted to our weekly reporting and would like to be, please fill in your details and what you would like to receive here.

We wish readers a merry Christmas and a prosperous and healthy New Year!

DWP launches major consultation on trusteeship, governance and administration

The Department for Work and Pensions has launched a major consultation seeking views on strengthening the governance and oversight of trust-based workplace pension schemes (including all of DB, DC and CDC). The DWP is clear that its vision for the pension market is that of a smaller number of bigger and better pension schemes, overseen by independent, highly skilled trustees, applying good governance and focussed on delivering the best outcomes for savers without risk of conflicts of interest, and this vision has shaped the questions asked in the consultation, which are open-ended and fact-finding in nature.

The consultation is wide-ranging in nature covering (amongst other things) the following: 

• Conflicts of interest – due to the increasing role played by professional trustees in the market the DWP is concerned about conflicts either through, for example, additional services (such as in-house administration) provided by trustee firms or concerns that trustees appointed to multiple boards may have less time to dedicate to their schemes. 
• Professional Corporate Sole Trustees (PCST) models – whose increased usage can pose different risks to scheme members and so which may benefit from greater scrutiny. DWP suggests that as decision making is in fewer hands there might be a lack of checks and balances and diversity of thought and members’ views may not be taken into account. Plus, as employers are putting PCST arrangements in place at short notice in some DB schemes, there may be insufficient opportunity for a full transfer of knowledge between the existing trustee board and the new PCST. 
• Diversity on trustee boards – trustee boards are often less diverse than the general population despite a broad consensus that diverse and inclusive pension boards are important for good governance, good decision-making and good member outcomes. The DWP wants to explore ways that more diversity, talent and skills can be brought to trustee boards. 
• A Public (independent) Trustee – as an alternative to the current process of removing and replacing a trustee by the Pensions Regulator. The DWP suggests that public trustees could provide a secure independent alternative to help ensure the proper administration and protection of beneficiaries’ interests. They would therefore like to explore the feasibility of introducing a public trustee to be used where a scheme’s trustees need to be replaced or when the Regulator is asked to appoint a trustee to an orphan scheme. 
• Skills and knowledge – the DWP wants to explore what additional requirements should be placed on professional trustees given the increasingly influential role they play in the UK pension system. This could include whether higher requirements through accreditation should be introduced, setting out on a statutory basis the standards professional trustees should meet and allowing the industry to deliver those standards rather than the current self-regulation model. 
• Support for lay trustees – whilst noting the important benefits that lay trustees can bring, the DWP says that small schemes governed only by lay trustees often do not meet the requirements expected of them and may require more support to fulfil their obligations. Therefore, they are considering the creation of a “one stop” website to signpost such trustees to all the available resources such as the trustee toolkit and the external support which they can access. 
• Member voice – the DWP notes the importance of hearing the members’ voice and worries about industry developments, such as DC consolidation and DB endgame planning, reducing its impact. The DWP would welcome views on how the voices of members can still be taken into account despite these changes in the landscape. 
• Administration – in recognition of the significant effect that poor administration can have on both individuals and the scheme, the DWP asks whether the Pensions Regulator should regulate pension administrators, either through being able to set scheme standards that trustees would need to ensure were met, or by directly regulating administrators. 

Consultation closes on 6 March 2026. It is not clear what happens next, but it seems that some of the suggestions, if they are to progress, need significant policy work and a new Pensions Bill to turn into reality.

FCA’s targeted support to go ahead

The Financial Conduct Authority and HM Treasury have announced the final steps in the delivery of a new “targeted support” regime as part of a long-standing review of the advice/guidance boundary. This regime, which will be fully regulated by the FCA, sits between non-regulated “guidance” and the fully regulated “advice” provided by authorised individuals to their customers. 

With the headline that at least 18 million people could be offered extra help with their investments and pensions over the next decade with the introduction of targeted support, the FCA has published a 207-page Policy Statement setting out the FCA’s near final rules for the targeted support regulatory framework, following the conclusions of its earlier consultation on its proposed rules. The FCA is going ahead with rules very similar to those which it proposed in June 2025 (see Pensions Bulletin 2025/26 for details). 

As proposed, the framework sets requirements including:

• To identify consumer segments with shared financial support needs or objectives and, where relevant, common characteristics, in order to deliver suitable ready‑made suggestions. 
• To communicate the nature of targeted support and the common characteristics of the consumer segment when delivering targeted support. 
• To adhere to existing product governance rules. 
• To regularly review and monitor the outcomes of the targeted support service. 

The FCA is publishing ‘near-final’ rules now, so firms have as long as possible to prepare for the regime’s launch. The FCA also plans to open the dedicated authorisation gateway in March 2026 for applications by firms; ie before the new rules come into force on 6 April 2026. The FCA says that it is already helping firms to prepare for the gateway opening through its pre-application support service and that firms which come to the gateway demonstrably ready, willing and organised to undertake targeted support will be authorised swiftly after the 6 April 2026 go-live date. 

The FCA has also published risk warnings for mainstream investments that sets out the FCA’s expectations of firms promoting investment products, and common misconceptions about risk warnings. It has also published joint statements with the Financial Ombudsman Service and the Information Commissioner’s Office on targeted support. These statements are intended, respectively, to clarify the approach to consumer complaints and redress, and how to consider existing direct marketing rules such as Privacy and Electronic Communications Regulations. The FCA also plans to publish case studies to clarify how firms should design consumer segments before the regime goes live. 

HM Treasury has published its response to a linked consultation on proposals to create a new specified activity of providing targeted support, launched in July 2025 (see Pensions Bulletin 2025/28). The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2026 will be laid as soon as Parliamentary time allows. Once this has been done, the FCA will issue its rules in final form. 

FCA sets out some rule changes for a changing pensions market

At the same time as publishing its near-final rules for targeted support (see the above article), the Financial Conduct Authority has launched a new consultation on rules to better support consumers using digital pension planning tools and consumers making non-advised decisions to transfer DC pensions. This follows the publication of a Discussion Paper in December 2024 (see Pensions Bulletin 2024/49). 

The 143-page consultation paper is in three parts as follows: 

Tools and modellers for existing pension savers 

The FCA is proposing a new regime for interactive digital pension planning tools for in-force pensions. This is intended to give firms flexibility to tailor their projections so that they most effectively support consumers to engage with their pensions and understand their choices. For firms that provide these interactive simulations and hold all underlying information for the scheme, the proposed regime would replace COBS 13, which was designed primarily for static projections in printed key features illustrations (KFIs). COBS 13 will continue to be applicable to static projections. 

The FCA’s proposals include measures to safeguard against risks to consumers such as over-optimistic growth rates or misleading information. 

Pension projection exceptions 

The FCA proposes a change to its rules so that pension schemes can include extra projections in annual benefit statements without needing to run these past the FCA for approval. These extra projections will show how much more money someone could have at retirement if they increase their contributions or access their pension later. They would use the same assumptions as the statutory money purchase illustration (SMPI) that schemes already provide by law. 

DC to DC transfers and consolidation 

The FCA proposes to introduce a new step in the non-advised transfer process to support non-advised consumers make informed decisions about whether and where to transfer or consolidate DC pensions. This step places responsibility on the existing and potential new schemes to identify and disclose key information to the consumer. This is to enable the consumer to compare certain core aspects of their existing scheme(s) and the potential new scheme, before they can formally request to start a transfer. 

The FCA’s aim is to enable non-advised consumers to identify, at a time when it can inform their decision if any valuable benefits would be lost on transfer and how existing and new schemes compare. 

Consultation on all these proposals closes on 12 February 2026 and the FCA intends to publish a Policy Statement with final rules in the latter half of 2026. 

Pensions UK publishes its 2026 stewardship and voting guidelines

Pensions UK has announced the publication of its Stewardship and Voting Guidelines 2026, which it says set out “strengthened expectations for how pension schemes can protect and enhance long-term value in a rapidly changing investment environment”. 

The guidelines are intended to provide a framework for pension schemes trustees and their advisers to drive responsible investment and influence corporate behaviour. The document starts with a useful summary of significant developments relevant to asset owners in 2025. The main contents are then split into sections that mirror the five relevant UK Corporate Governance Code sections, as well as sections on climate change and sustainability, social factors and workforce, and capital structure and allocation. A final section in the guidelines encourages investors to take a holistic approach to voting on any company issues and to think about their views of the company board as a whole. Pensions UK has separately provided a tabular summary of its voting recommendations. 

There is also a stewardship fundamentals document that Pensions UK recommends that anyone new to the guidelines should start with.

In introducing these documents, Pensions UK notes that stewardship is becoming more challenging, with a steady erosion of the rights that allow investors to influence companies, even as new risks such as AI and cybersecurity grow more complex. Pensions UK hopes that its 2026 guidelines reflect this, providing clearer expectations, stronger escalation pathways, and a greater focus on collaboration to help schemes navigate a tougher environment.

Pensions dashboards year end progress report published 

The December 2025 progress update report by the Pensions Dashboards Programme, announced by the Money and Pensions Service, contains some positives, with the Programme’s Principal, Chris Curry, saying that it comes at a time of significant activity to bring dashboards closer to being a reality. 

• Connection activity is moving forward “at a steady pace” with over 60 million workplace and personal pension records, representing 75% of such records in scope, now connected. MaPS is confident that connection remains on course to meet the 31 October 2026 overall deadline. In addition, the State Pension has connected, adding tens of millions of State Pension records. 
• Consumer testing of the MoneyHelper Pensions Dashboard is under way and has currently passed the halfway mark of the first of two phases. Overall, the testing so far has been broadly positive, with users generally expressing good levels of satisfaction for the service against their expectations. However, it has not all been plain sailing, with some difficulties over matching and a “range of pain points and issues” identified. 
• Private sector dashboards – there is some reporting on this, but importantly, whilst the Government is committed to the principle of private sector dashboards, it is prioritising the MoneyHelper Pensions Dashboard and there is no timetable yet for private sector dashboards to become available. 

The progress update report also covers engagement issues, an update from the Pensions Dashboards Advisory Group (which amongst other things expresses some concern over the lack of progress on private sector dashboards) and short updates from the DWP, Pensions Regulator and the FCA.

Regulator provides an update on its Master Trust capital reserving review

The Pensions Regulator has provided an update on its review of capital reserving amongst authorised master trusts that was expected to have been published this month (see Pensions Bulletin 2025/42). This latest update is contained in the December 2025 Master Trust Bulletin which has been sent to subscribers and we expect will appear on this webpage in due course. 

The Regulator says that it has completed a detailed internal review of reserving approaches and market trends since authorisation and its initial findings highlight: 

• Areas of prudence in the Regulator’s guidance that could be safely relaxed to reflect the current maturity of the market;
• Behaviours by some master trusts that add further prudence and push up reserves unnecessarily, which could be addressed through greater awareness of best practice and alternative approaches; and 
• A need to consider longer-term changes to legislation and the Code of Practice to reflect a market that will consist of large-scale schemes by 2035. 

The Regulator is now engaging with the industry throughout December 2025 and into early 2026 to share findings and seek views on appropriate changes. The Regulator will communicate the outcome and updated guidance early in 2026.

Financial services regulatory pipeline updated

The Financial Services Regulatory Initiatives Forum, via the Financial Conduct Authority, has announced the publication of the latest edition of the Regulatory Initiatives Grid, setting out the regulatory pipeline for financial services over the next two years and covering current and planned initiatives for the nine UK regulators and government departments within the Forum, including the FCA and the Pensions Regulator. 

Turning to those matters impacting the pensions sector the December 2025 edition of the Regulatory Initiatives Grid reprises a number of topics already known about, such as those being taken forwards by the Pension Schemes Bill and those relating to targeted support and on changes to FCA rules for a changing market (see articles above). There are also the following snippets: 

• Following the publication of its updated administration guidance (see Pensions Bulletin 2025/50), the Pensions Regulator is expected to publish its administration strategy in the first half of 2026. 
• The FCA aims to consult on changes to the 0.75% pension charge cap in Q2 2026 to ensure it does not disincentivise investments that may provide higher returns for consumers despite having higher performance fees, whilst ensuring that consumers are protected. And on this topic, the FCA Chief Executive Nikhil Rathi has written to Sir Keir Starmer laying out the FCA’s plans to overhaul the charge cap so that DC pension savers will be able to access high-performing investment funds.

Pensions Regulator issues its latest DB landscape report

The Pensions Regulator has published its latest overview of the occupational defined benefit and hybrid scheme landscape in the UK, reporting on scheme status, membership levels and assets under management.

Key findings include the following (some are taken from the annex to the report):

• The number of private DB and hybrid schemes reduced from 5,190 in 2024 to 5,060 in 2025. On average, there has been a yearly decline of 3% in the total number of schemes since 2012, with notable decreases in the number of schemes in wind up, schemes still open to accrual and schemes open to new members. In contrast, there has been a steady rise of schemes closed to future accruals since 2012, now making up almost three-quarters of all private DB and hybrid schemes.
• Overall membership in private DB and hybrid schemes fell from 9,423,000 in 2024 to 9,174,000 in 2025. Separately, the steady decline in active membership in such schemes since 2012 seems to have halted in 2025, being explained by an increase in active membership in the very largest schemes, ie with over 10,000 members, while those with fewer members continue to show a decline.
• The technical provisions funding level has remained unchanged at 118% since 2024. However, both assets and liabilities fell by 10% over the year. The percentage of schemes in technical provisions surplus is 82% in 2025 compared to 80% in 2024.

As in previous years, the data for this report has been taken from the DB and hybrid scheme returns, this time reporting on data held by the Regulator at 31 March 2025.

Pensions Ombudsman issues pension overpayments factsheet 

The Pensions Ombudsman has announced the publication of a new factsheet whose purpose is to help scheme members understand the key issues arising when a pension has been overpaid. 

The factsheet explains what an overpayment is, what to expect from the scheme when an overpayment occurs and how and when the Pensions Ombudsman can help if a dispute cannot be resolved. It also usefully sets out in summary form the legal defences that can potentially be used where the member feels that they should not return the overpayment. 

The Ombudsman hopes that the factsheet can support both members and pension schemes to work together to agree whether, how and over what period an overpayment should be recovered. This in turn should allow the member and the pension scheme to resolve the issue without the need to come to the Ombudsman, with any complaints they do receive being more straightforward to resolve.