UK Pension Schemes Bill: what you need to know

Explore our resource page for the 2025 Pension Schemes Bill, where we share our latest thinking on what the Bill is expected to cover - and what it could mean for UK pension schemes.

Last updated on: 5 June 2025

On 5 June 2025 the Government announced the introduction of a bumper Pension Schemes Bill. The DWP has also published a road map setting out a provisional plan to implement reforms across DC and DB workplace pensions.

This Bill covers a wide range of topics. On the DB side this includes a legislative framework for superfunds, amended DB surplus distribution rules, and PPF-related matters. Key DC areas include scheme consolidation, decumulation, small pots consolidation and value for money.

Making best use of our industry contacts, our policy leads and technical experts will share their comments and insights here.

As further detail emerges we will update this page, focussing on the key issues that all schemes and sponsors need to consider.

Explore the key issues

In January 2025 the Government said that it would legislate to make it easier for surplus from DB schemes to be paid to employers or to be given to scheme members as additional benefits. This was confirmed in the Government's response to the DB Options consultation published on 29 May 2025.

Enabling clauses are included in the Bill that remove some of the legal barriers to surplus distribution. Regulations are expected to reduce the threshold funding level for surplus distribution from "buyout" to "low dependency". Taken together these will make it easier to distribute surplus and increase the amount of surplus that can potentially be distributed.

The Bill provides for a new legislative framework applicable to the authorisation and supervision of DB superfunds, including rules on capital extraction and paving the way for new providers to enter the market. Quite lengthy Bill clauses have been needed to cover the necessary ground.

Scheme consolidation

To accelerate and help enable scale and consolidation in the DC market the Bill sets out new rules that will create multi-employer DC scheme “megafunds” of at least £25 billion.

There is also a controversial reserve power being taken under which the Government can set quantitative baseline targets for pension schemes to invest in a broader range of private assets, including in the UK, for the benefit of savers and for the economy.

Decumulation

The Bill contains a new duty on DC scheme trustees to offer a suite of decumulation products and services including default pension benefit solutions, which are suitable for their members and consistent with pension freedoms. Such services are to act as a backstop unless the member makes an active choice.

Small pots consolidation

The Bill provides for an authorised and multiple default consolidator model, whereby certain DC pots under a specified limit will be automatically swept up into a consolidator scheme. Again, quite lengthy Bill clauses have been needed.

Contractual override and bulk transfers

The Bill enables contract-based DC schemes providers to move or consolidate their schemes and members’ pots to reduce fragmentation and improve outcomes, with adequate protections that ensure it is in savers best interests.

Value for money

Whilst the framework for contract-based schemes is being finalised by the FCA, the Bill contains measures to apply the framework to trust-based DC schemes, with those schemes found wanting having to take remedial action and possibly having to place their savers into a scheme that is providing value for money. Once more, lengthy Bill clauses have been needed.

In January 2025 the Government said that it is to consider giving the PPF Board more flexibility when setting the levy. The PPF has said that it would have considered a zero levy for this year, given the robust funding position of the PPF, but cannot do so because it would then not be able to raise any levy again, as it is currently prevented from making annual increases of more than 25% in the levy. This flexibility needs primary legislation and the Bill provides for this.

The Bill provides for the PPF and FAS to be brought within scope of the pensions dashboard regime so that those with deferred entitlements from either will be able to view them alongside their state and any occupational and personal pension entitlements.

Finally, the ability of the PPF and FAS to make terminal illness payments is extended through the Bill. It seems that a Private Member’s Bill covering similar ground will now be withdrawn.

The Bill contains a number of matters affecting the Local Government Pension Scheme in England and Wales with the aim of “consolidating and professionalising” their investment operations.

The Bill re-establishes that the Pensions Ombudsman is a competent court for the purposes of concluding overpayment disputes where recoupment is sought. This will reverse the November 2023 Court of Appeal decision.

There may be more topics. The longer the Bill takes to get through Parliament, the more opportunity there will be for the Government to introduce amendments on new topics. But right now, it is not clear what these new topics (if any) might be.