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 is covered in the Bill - and what it could mean for UK pension schemes.

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, including the key issues all schemes and sponsors need to consider.

Explore the key issues

Enabling clauses are included in the Bill that remove some of the legal barriers to surplus distribution, making it easier for surplus from DB schemes to be “safely” released to employers. This is worth collectively £160 billion by the Government’s estimate, to support employers’ investment plans and to benefit scheme members.

In addition to what appear to be wide-sweeping new powers to amend scheme rules, the Bill also adjusts the legislative test that the trustees must apply when deciding whether to release surplus. Regulations are expected to reduce the threshold funding level for surplus distribution from "buyout" to "low dependency". Taken together all this will make it easier to distribute surplus and increase the amount of surplus that can potentially be distributed.

The Government’s roadmap anticipates that the surplus regulations and associated guidance will come into force by the end of 2027.

What will the Government’s new surplus rules mean for your DB scheme?

Explore the government's response to the Options for DB Schemes consultation where they lay out policy intentions for DB surplus, and the growing choice and innovation in the endgame market.

Most DB schemes already plan to share surplus or will review strategy, LCP survey finds

LCP’s latest survey of the defined benefit (DB) market reveals a growing interest in surplus distribution.

Majority of DB schemes ‘only starting to digest’ new endgame freedoms

A poll undertaken at a recent LCP webinar on the new rules around the use of DB surpluses has found a high level of interest in exploring the potential for new ways of accessing surplus funds.

The Bill provides for a new legislative framework applicable to the authorisation and supervision of DB superfunds, to replace the Regulator’s so-called interim regime. This includes rules on capital extraction and paves the way for new providers to enter the market. Quite lengthy Bill clauses have been needed to cover the necessary ground. It also appears that the gateway tests for schemes to transfer to superfunds are being weakened compared to the current interim regime, with the effect that more schemes will be able to consider using this route to deliver their members’ benefits than can do currently.

The relevant regulations and associated regulatory Code are expected to come into force in 2028.

Milestone moment as Clara completes latest superfund transaction – What next for this burgeoning market?

Laura Amin looks at the drivers behind the burgeoning superfund market, now that Clara has now completed deals across the full range of its market offerings.

The 2025 Pension Schemes Bill unlocks potential £600bn market for DB superfunds

LCP comments on the recent Pension Schemes Bill, which could unlock a £600 billion market for DB superfunds.

Increasing momentum in the DB superfund market raises important questions for scheme endgames

New analysis from LCP suggests that DB superfunds will have a growing role in DB pension scheme endgames.

Pensions Bill: No surprises on superfunds, but 2028 date will be frustrating for current market participants

Our response to superfund detail outlined in the Pensions Bill

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. DC multi-employer schemes operating in the auto-enrolment market need to have £25bn in assets across their pension products by 2030 but there is also an easement whereby providers with over £10bn in assets and a credible plan for achieving scale will have until 2035 to do so.

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. This appears to be largely baked into the proposed law relating to master trusts and certain group personal pensions having to build up their asset holdings in respect of their “main scale default arrangement”.

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. It appears from the roadmap that the Government envisages this being in place by 2026/27.

Small pots consolidation

The Bill provides for an authorised and multiple default consolidator model, whereby certain DC pots worth £1,000 or less will be automatically swept up into a consolidator scheme that is certified as delivering good value to savers. Again, quite lengthy Bill clauses have been needed. This should deliver savings to providers and simplicity to savers. However, this is still several years away since the roadmap states that the “implementation of the Small Pots Consolidation solution is purposefully designed to fully come into force once the market of a smaller number of megafunds is in place” – ie after 2030.

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. This is currently expected to start from 2028.

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.

It is worth noting that there is much more to this than measurement and reporting. For example, a “not delivering” rating starts a process that could result in the scheme or arrangement being transferred to a better scheme. An “intermediate” rating (of which regulations may specify more than one) also starts various requirements – including preparing an “improvement plan” and providing that to the Regulator, so it is not a “benign” rating. The Pensions Regulator is being given significant new discretions and intervention powers in this area, including challenging a rating assigned by trustees/managers. The framework will apply to DC occupational pension schemes from 2028 based on the roadmap.

Pensions Bill Unpacked: Navigating change and consolidation

This webinar, led by LCP experts Lydia Fearn, Stephen Budge, and Steve Webb, focuses on the recently published Pension Schemes Bill and its implications for defined contribution (DC) savers, employers, trustees, and the DC industry.

Pensions Bill: “We welcome the ambition to help DC schemes fulfil their potential, but there are risks in a market dominated by megafunds”

Our response to the DC details outlined in the Pensions Bill

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. The Private Member’s Bill covering similar ground has now been withdrawn.

‘Very positive step’ to reform PPF levy – Steve Webb, LCP

Steve Webb welcomes the announcement by pensions minister Torsten Bell, giving PPF new flexibility to reduce their levy.

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 delivers a solution to the Pensions Ombudsman not being a competent court for the purposes of concluding overpayment disputes where recoupment is sought and indeed other disputes. This will reverse the impact of 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.