UK Pensions Law Updates - November 2025

Mr D and Mrs D

Facts

Following a decision in the Court of Appeal on the validity of pension increases granted to members, it was found that Mr D and Mrs D, pensioners of the BIC UK Pension Scheme, had received overpayments over 21 years totalling £31,143 and £16,408 respectively. The trustees sought to recover these overpayments from future pension payments after notifying the members in March 2020. The complainants accepted that their pension should be corrected to the right level going forwards but disputed recovery of historical overpayments, citing lack of prior notification and financial hardship.

Decision

The Deputy Pensions Ombudsman found it inequitable for trustees to recoup overpayments accrued before 1 April 2020 (when the members were notified of the overpayments). Each complainant was awarded £1,000 for distress and inconvenience, to be offset against the recoverable amount. See the Ombudsman’s Determination here.

Comment

The case underscores the need for trustees to act fairly and promptly in overpayment recovery, particularly where members were unaware of the issue for many years. Notification and the impact on members’ finances are key considerations in such cases.

Interpretation of “state pension age” in scheme rules

Outline

The High Court has clarified the interpretation of “state pension age” in the rules of a defined benefit pension scheme. The case concerned a bridging pension under the 2001 scheme rules, which was to cease at “State pension age”, defined by reference to “the rules in paragraph 1 of Part I of Schedule 4 to the Pensions Act 1995 (rules for equalisation of pensionable ages for men and women)”.

The dispute was whether this reference should be interpreted “statically” (i.e. by reference to the legislation as it stood in 2001, when the rules were adopted) or “dynamically” (i.e. by reference to subsequent legislative changes, including increases to state pension age).

Decision

The High Court held that the reference to “state pension age” in the scheme rules was static, meaning it referred to the legislation as it stood at the time the rules were adopted.

The judge found that the draftsman used the legislative reference as a “convenient shorthand” for a factual situation (equalisation of pensionable ages for men and women), rather than intending to incorporate future changes to state pension age.

The Court concluded that the member’s state pension age for the purposes of the scheme was 65, not 66, and allowed the appeal, setting aside the Pensions Ombudsman’s contrary determination.

Comment

This decision provides important guidance on the interpretation of statutory references in pension scheme rules. Many schemes include a general interpretation provision catering for changes to statute, but there was none in this scheme. The judgment confirms that, absent clear wording to the contrary, references to legislation in scheme rules will not necessarily be read as “ambulatory” or dynamic. Instead, the Court will look closely at the context and purpose of the reference. Here, the judge was persuaded that the reference was intended to fix the state pension age by reference to the position at the time of drafting, rather than to track future legislative changes. This approach provides greater certainty for trustees and employers, but also highlights the need for careful drafting and regular review of scheme rules to ensure they remain fit for purpose as the legislative landscape evolves. Trustees should consider whether their own scheme documentation could give rise to similar disputes, particularly where legislative references are used as shorthand for benefit definitions or eligibility criteria.

For further detail, see Spirit (Legacy) Pension Trustee Ltd v Alexis 2025 EWHC 2237 (Ch) (1 September 2025)

Mr R

Facts

Mr R was a member of a public sector pension scheme who received incorrect information about the pensionability of his temporary promotion salary.

Despite a 2014 rule amendment excluding temporary promotion salaries from pensionable pay, in practice the scheme continued to treat such salaries as pensionable and quoted benefits on this incorrect (higher) basis.

Mr R retired in 2018, relying on this information, and later learned his pension would be reduced to the correct rate.

Decision

The Pensions Ombudsman found the scheme manager had breached its duty of care by providing inaccurate information, constituting maladministration. Mr R was found to have reasonably relied on the incorrect information and suffered financial loss by retiring earlier than he otherwise would have. The Ombudsman directed the scheme manager to pay Mr R 80% of the financial loss incurred and £1,000 for distress and inconvenience. See the Ombudsman’s Determination here.

Comment

This case highlights the importance of ensuring that administration processes are fully updated to reflect rule amendments.

Pension Schemes Bill 2025

Current Status and next steps

The Pensions Scheme Bill continues its progress through Parliament. In September 2025, it completed its committee stage in the House of Commons, with numerous Government amendments approved. These include the new provisions on the remedy to Virgin Media issues (see the dedicated update on this below) and technical changes to scale, asset allocation, and surplus rules. The Bill has now been reported to the Commons and will move to the report stage and third reading (this date is to be confirmed), where further amendments may be made. It will then proceed to the House of Lords for further scrutiny before becoming law.

Comment

Despite not yet being law, the impacts of the Bill can already be felt in the pensions sector. For example, the potential remedy to Virgin Media issues has already been of great comfort to many trustees, and the progress of the Bill has allowed the PPF to set a levy at 0% for the 2025/2026 levy year. Wholesale changes to the Bill are not expected at this stage, meaning of its continuation through Parliament and eventual assent into legislation will be closely followed by all involved in the pensions sector.

Pensions Regulator Action: Worthington Employee Pension Top Up Scheme

Outline

The Pensions Regulator (“tPR”) has recently published determination notices and a regulatory intervention report in relation to the Worthington Employee Pension Top Up Scheme (the “Scheme”), a money purchase scheme established by Marcus Worthington and Company Ltd (“MWCL”). Following MWCL’s administration in 2019, concerns were raised about significant breaches of the employer-related investment (“ERI”) restrictions under section 40 of the Pensions Act 1995. Over a 7-year period, the Scheme trustees had loaned funds and later invested £700,000 (nearly all of the Scheme’s assets) to businesses and a trust linked to MWCL. The investments ultimately failed, resulting in the total loss of Scheme funds.

TPR’s response included both regulatory and criminal action. Its Determinations Panel imposed a £29,000 penalty on the chair of trustees (also MWCL’s managing director) for six ERI breaches, citing recklessness and a failure to seek appropriate advice. Separately, a former trustee (and finance director of MWCL) received a suspended prison sentence for making prohibited loans from Scheme assets.

Comment

TPR’s intervention in this case demonstrates its commitment to pursue those who flout the legislative ERI restrictions, including through criminal proceedings where appropriate. A copy of the regulatory intervention report can be found here.

Pensions Schemes Bill 2025 Virgin Media – Government’s draft legislation to remedy uncertainty

Current Status and next steps

As a reminder, the Virgin Media case held that benefit alterations to contracted-out salary-related schemes are void if they failed to obtain the written actuarial confirmation required by legislation at the time (often in the form of a “section 37 certificate”). In September 2025, the Government published draft legislation (through the Pension Schemes Bill 2025) to allow trustees to request the scheme actuary to consider whether, assuming the benefit alterations were validly made, they would not have prevented the scheme to continue to satisfy the statutory minimum standard. A positive confirmation from the actuary can validate the potentially defective alterations. Please see our summary here, which elaborates further on the considerations which the actuary should have in providing a confirmation, and the circumstances under which this legislative remedy would not be available.

In parallel, the Financial Reporting Council (FRC) has confirmed that it will develop technical guidance to support scheme actuaries in providing the necessary confirmations under the above legislative remedy.

Comment

The legislative remedy is a welcoming news for employers and trustees of pension schemes which have been affected by the Virgin Media judgment, particularly given the wide discretion available for the scheme actuary to provide a retrospective confirmation in relation to past benefit alterations.

We expect that trustees of affected schemes may however choose to continue to maintain a “holding pattern” until the proposed legislative remedy is enacted, the Verity Trustees litigation (which is expected to clarify which historical amendments need backdated actuarial confirmation) is resolved, and the forthcoming FRC guidance is available. Trustees should also be mindful that taking certain actions (referred as “positive actions” under the draft legislation) might render them ineligible for the legislative remedy when it becomes available.

House of Lords launches inquiry into IHT on unused pension funds

Current Status and next steps

As a reminder, the Government released draft legislation in July 2025 as part of the 2026 Finance Bill proposing that, from 6 April 2027, most unused pension funds and death benefits will be included in a deceased individual’s estate for inheritance tax (IHT) purposes. In September 2025, the House of Lords Finance Bill sub-committee launched an inquiry into the Bill, seeking evidence on the practical challenges for personal representatives in identifying and reporting any IHT due, the potential liquidity issues in IHT payment, the level of awareness of and possible issues to be faced by personal representatives and scheme administrators.

Comment

The inquiry highlights that there are still practical and administrative challenges to be resolved before the significant change to bring unused pension funds and death benefits into the IHT regime from 6 April 2027, notwithstanding the latest legislation appears much more workable than its previous iteration. Trustees should continue to keep a watching brief on this legislative development, and consider whether changes to the administrative process and scheme amendments may be required in due course when the final legislation is available, and relevant industry guidance is developed.

Pensions Regulator publishes report on scheme rescue following employer insolvency

Outline

In August the Pensions Regulator issued a regulatory intervention report detailing its role in the rescue of the Edinburgh Woollen Mills Ltd Retirement Benefits Scheme. The sponsoring employer, Edinburgh Woollen Mills Ltd (EWM), entered administration in November 2020 after a history of profitability, raising concerns about the circumstances leading to its rapid collapse. The scheme, which was underfunded at the time, entered a Pension Protection Fund (PPF) assessment period.

The Regulator exercised its powers under section 72 of the Pensions Act 2004 to obtain financial information, uncovering significant pre-insolvency transactions, including intra-group loans and substantial dividend payments to EWM’s owner. These findings prompted the Regulator to consider anti-avoidance action. However, following negotiations involving Purepay Retail Ltd (the new owner of EWM), the scheme trustees, the Regulator, and the PPF, a scheme rescue was agreed and implemented in December 2024. Key elements of the rescue included:

• Purepay Retail Ltd becoming the scheme’s statutory employer via a scheme apportionment arrangement and making a £7 million lump sum contribution to the scheme;
• The scheme exiting the PPF assessment period;
• Agreement of a recovery plan to March 2028 and prudent technical provisions for the scheme’s triennial valuation;
• Introduction of certain covenant protections.

The Regulator reports that the scheme is now funded above PPF levels and is projected to reach full funding on a low dependency basis within three to four years. The Regulator emphasised the importance of employers keeping trustees fully informed about their financial position, especially in times of financial distress.

Comment

This intervention by the Pensions Regulator demonstrates the increasing scrutiny of corporate activity preceding employer insolvency. The Regulator’s willingness to consider anti-avoidance action, coupled with its facilitation of a negotiated scheme rescue, underscores its proactive approach to protecting member benefits. Trustees and employers should note the Regulator’s clear expectation of transparency and early engagement in situations of financial difficulty, as well as the potential for regulatory intervention where pre-insolvency transactions may have prejudiced scheme funding.

For more details, see here: The Edinburgh Woollen Mill Ltd Retirement Benefits Scheme - Regulatory intervention report

PPF Levy Set to Zero for 2025/26

Outline

On 23 September 2025, the Pension Protection Fund (“PPF”) announced that both risk-based and scheme-based levies for occupational pension schemes will be set at zero for the 2025/26 levy year. This follows the introduction of the Pension Schemes Bill 2025, which grants discretion over whether to raise levies each year and removes the previous restriction that limited annual levy increases to 25% (which, by preventing the level from increasing rapidly if the financial position changed suddenly, had previously limited the ability for the PPF to reduce the levy to 0%). The PPF pointed to its strong financial position which underpins this decision but noted that it retains the ability to reinstate the levy in future years if necessary. This change has resulted in an estimated £45 million saving for UK DB pension schemes, benefiting around 5,000 schemes.

Comment

This change shows another step in the PPF’s ongoing goal of financial self-sufficiency. Whilst no doubt a welcome result for trustees and sponsoring employers alike, the PPF has been clear that future levy requirements may change depending on the PPF’s financial position and further legislative developments. Whilst the Bill continues to progress through Parliament, it seems unlikely that there will be any alterations to these provisions given the positive response received to date. The PPF will continue to engage with policymakers and the industry regarding plans for 2026/27.

UK Pensions Horizon Scanning

A reminder of key upcoming developments in the UK pensions space

2025 Developments

Collective Defined Contribution (“CDC”) Schemes Regulations - Autumn

Regulations will be laid before Parliament extending the legal framework for CDC Schemes to include non-associated multi-employer schemes

Progress of the Pension Schemes Bill 2025 through Parliament

See page 2 of this update

2026 onwards

31 October 2026

Pension dashboards

Mandatory final connection deadline for all in-scope schemes

6 April 2027

Inheritance Tax changes for pensions

DB - 2027

Surplus flexibilities to come into force, with DWP to consult on draft regulations in late 2026

DC - 2027/28

Default decumulation duties to apply, with DWP to consult on draft regulations in 2026/27

6 April 2028

Increase in Normal Minimum Pension Age

The minimum age at which most people can access their pension will increase from age 55 to age 57

DC - 2028

First VfM assessments will be required, with DWP to consult on draft VfM regulations in 2026/27

DB - 2028

Superfunds regulations to come into force, with DWP to consult on draft regulations in early 2026

5 April 2029

Expiration of Lifetime Allowance Statutory Override

The override facilitates the retention of limits under scheme rules which have been drafted by reference to the Lifetime Allowance

DC - 2030

Small pots transfer duties to come into force, with DWP to consult on draft regulations in 2027/28

DC Master Trusts and Group Personal Pension Schemes - 2030

Scale requirements to come into effect

RPI alignment with CPIH - 2030