UK Pensions Law Update - May 2026

PO Cases

Mr L and the Estate of Mr O (CAS-89142-L1R8): recovery of overpayments: entitlement to a winding-up lump sum ceased on member's death

Facts

Mr L complained on behalf of the estate of his late father, Mr O, about recovery of a winding up lump sum paid after Mr O's death. As part of a buy out and planned wind up, the Scheme allowed members with relatively small pensions to exchange their benefits for a one-off lump sum. Mr O accepted the offer, but died before payment. His next pension payment and a £11,734 net lump sum were paid before the trustee became aware of the death and were later sought to be recovered from the estate.

Decision

The Pensions Ombudsman dismissed the complaint. He held that the payment formed part of a process to reduce liabilities ahead of buy out and wind up and therefore constituted a "winding up lump sum" under section 166(1) of the Finance Act 2004. Such payments may only be made to a living member, and entitlement ceases on death. Mr O was therefore not entitled to the lump sum, which was an unauthorised overpayment recoverable from the estate. The Ombudsman rejected arguments that a separate contract arose from the exchange offer, or that recovery should be barred on the grounds change of position or a limitation defence, noting the estate had suffered not suffered the required financial detriment. It was clear that no expenditure had been made in detrimental reliance on the overpayment.

Comment

The determination confirms that entitlement to winding up lump sums does not survive a member's death. The Ombudsman adopted a strict approach to overpayment recovery, emphasising that receipt of an overpayment in good faith is insufficient to prevent recovery where there is no detrimental reliance.

The case highlights the importance of timely death notifications and effective mortality screening.

See here for the full decision.

Mrs N (CAS-83019-G2S0): transfers - reasonable and legitimate for trustee to require two legal opinions as precondition to overseas transfer

Facts

Mrs N was a member of a defined benefit scheme. She requested and received a transfer pack for a transfer to a UK registered scheme that was guaranteed for three months. Mrs N's IFA later confirmed that the proposed receiving scheme was a Maltese qualifying registered overseas pension scheme (QROPS). The administrator agreed to extend the guarantee period, but required Mrs N to obtain both an English and Maltese legal opinion, at her own cost, confirming QROPS status. Mrs N declined to do so. After a further CETV was issued, she transferred first to a UK SIPP and then to the QROPS. She complained that the requirement to obtain a legal opinion was not mandatory under regulations or the scheme rules, and the trustee had therefore obstructed her statutory right to transfer her pension.

Decision

The Deputy Pensions Ombudsman dismissed the complaint. Before making a statutory transfer, trustees must be satisfied that all legislative conditions are met, including that an overseas scheme qualifies as a QROPS within the meaning of section 169 of the Finance Act 2004. If the conditions are not met, the Trustee is not under any legal obligation to make the transfer.  The ROPS list published by HMRC is not conclusive, and it was reasonable for the trustee to require two legal opinions at the member's expense. As Mrs N chose not to comply and transferred via a SIPP instead, there was no maladministration or basis for compensation.

Comment

This determination confirms that trustees can legitimately require robust evidence before agreeing to an overseas transfer on matters which are outside of the Trustee's reasonable expertise. Trustees may require legal evidence, at the member's expense, where reasonably necessary to determine whether an overseas scheme meets the definition of a QROPS. The decision reflects continuing concerns about pension scams and the limited reliability of HMRC's ROPS list. It also shows that members are unlikely to obtain redress where additional costs or delays arise from their decision not to meet reasonable evidential requirements imposed by trustees acting proportionately.

See here for the full decision.

Mrs R (CAS-13126-Z0N2): transfers - trustee remained liable for deferred scheme benefits as no valid transfer out was evidenced

Facts

Mrs R was a deferred member of a defined benefit occupational scheme, with benefits accrued between 1972 and 1990. The Scheme Rules permitted the trustee to transfer a member's benefits to another scheme, provided that it was tax approved and the member requested a transfer out. Scheme records later showed an alleged transfer of her benefits, including GMP, to another scheme in 1992. When Mrs R attempted to claim her pension in 2016, she was told her benefits had been transferred out. Despite numerous enquiries, the alleged receiving provider could find no record of a policy. HMRC transfer records were also incomplete, and Mrs R denied requesting or consenting to any transfer.

Decision

The Deputy Pensions Ombudsman upheld the member's complaint. She found the trustee's evidence which suggested the member had transferred out to be incomplete and inconsistent, noting the absence of any evidence that the member had in fact requested a transfer out or that a payment to the alleged receiving provider had been made. HMRC and the alleged receiving scheme held no reliable evidence of a completed transfer, and the trust deed would not have permitted the partial transfer suggested by incomplete HMRC records. On the balance of probabilities, the Deputy Pensions Ombudsman found that no valid transfer had therefore occurred, and liability for Mrs R's benefits remained with the original scheme.

Comment

The determination demonstrates the high evidential threshold trustees must meet when establishing that a past member has in fact transferred out. Ledger entries and fragmentary HMRC records were insufficient without the standard documentation expected for a valid transfer, particularly evidence of member consent and receipt by the receiving scheme.

See here for the full decision.

Mr N (CAS-44682-N7X6): recovery of overpayments - member failed to demonstrate detriment for estoppel and change of position defences

Facts

Mr N was a member of a defined benefit occupational pension scheme. He transferred in benefits in 1984, receiving a value for money (VFM) pension underpin tested at age 65.

Later, the Scheme sex equalised retirement ages between men and women at age 60. This was somewhat unusual as it resulted in more generous benefits for men than required by the Barber case.

The issue was that administrators,  erroneously, started testing the VFM underpin at age 60 as well - when there had been no intention to change this. This was more generous to Mr N and resulted in an overpayment of £20,923.75. The error was identified in 2019 and recovery was sought.

Decision

The Ombudsman found that the VFM underpin was intended to be tested at age 65 and had been miscalculated, creating an overpayment. The pension could be corrected to the proper level and it was equitable for the trustee to seek overpayment. The Ombudsman held there had been no negligent misstatement, Section 91 of the Pensions Act 1995 did not prevent correction, however, a County Court order was required before recovering overpayments from future pension payments. Mr N's legal and equitable defences failed due to lack of evidence of material detriment. £1,500 was awarded for distress and inconvenience caused by maladministration.

Comment

This determination illustrates the Ombudsman's approach to pension overpayments and recovery. Trustees may correct pensions that have been overstated and recover overpayments where members cannot show clear, evidenced and causally linked detriment. Members must show clear, evidenced and causally linked detriment to resist recovery.

See here for the full decision.

Cases

McKavney v Serco Group plc: Member not entitled to early payment of deferred benefits following employment transfer and subsequent redundancy

Facts

The claimant was a "protected person" under the Electricity (Protected Persons) (England and Wales) Pension Regulations 1990 (EPP Regulations). In short, this meant that as a result of being employed in the electricity industry before privatisation he held certain statutory rights to ongoing defined benefit accrual and enhanced redundancy pensions.

His employment transferred to Serco in 2005, at which point he elected to transfer his accrued benefits from the Electricity Supply Pension Scheme (ESPS) into the Serco Pension and Life Assurance Scheme (SPLAS).

In 2012, his employment transferred under TUPE to a Serco subsidiary which was then sold to AMEC. He did not exercise his right under regulation 6(5) of the EPP Regulations to transfer his accrued SPLAS benefits to the AMEC pension scheme within the available two-year window. When he was made redundant by AMEC in 2015 at age 56, he received an immediate unreduced pension from the AMEC scheme, but no corresponding early payment from SPLAS.

He complained to the Pensions Ombudsman that he was entitled to early payment of his deferred SPLAS benefits, either on the 2012 TUPE transfer or on his 2015 redundancy, relying on provisions derived from the EPP Regulations which provided for early payment where an active member was "compulsorily retired from Service by his Employer due to redundancy or a reorganisation of the Employer's business". The Ombudsman rejected the complaint and the member appealed to the High Court.

Decision

The High Court dismissed the appeal and upheld the Ombudsman's determination. It held that the early retirement provisions were not engaged in relation to his SPLA benefits on either the TUPE transfer or the later redundancy.

"Compulsorily retired" and redundancy / reorganisation: The Court held that "compulsorily retired" denotes an involuntary termination of the contract of employment. A TUPE transfer is not a dismissal, but a continuation of the same employment with a new employer, so the 2012 transfer did not amount to redundancy or the type of business reorganisation contemplated by the rule.

"Pensionable Service" versus "Service": The Court also accepted that, while the member ceased "Pensionable Service" in SPLAS when his employer stopped participating in that scheme, his "Service" (meaning his employment) had not "ended", because his employment continued with AMEC under TUPE. The contrast in the drafting between "Pensionable Service" and "Service ended" was intended to focus on whether employment had ceased altogether, not on whether the member had left the participating employer's group.

Accordingly, the conditions for early payment of SPLAS benefits were not satisfied on either the 2012 transfer or the 2015 redundancy, and the claimant remained entitled only to deferred benefits under SPLAS.

Comment

This decision reinforces a number of important points for schemes:

Interpretation of Scheme rules: the Court applied the principles of pension scheme interpretation from the Supreme Court decision in Buckinghamshire CC v Barnardo's [2018] UKSC 55. The need to construe pension schemes against their regulatory context, extended to statutory frameworks such as the EPP Regulations. The Court was also careful to distinguished between the meaning of "Pensionable Service" and "Service".

TUPE transfer is not "compulsory retirement": The Court's analysis underlines that a TUPE transfer will not normally amount to redundancy or "compulsory retirement", even where it is driven by corporate restructuring. The legal test turns on termination of the employment contract, not on changes in the identity of the employer or in group structure. Members cannot rely on protected person style wording to convert ordinary outsourcing or sale transactions into redundancy based early retirement events.

Protected persons' rights are bounded by the scheme and regulations: The EPP Regulations are designed to protect certain employees from detriment on industry restructuring, but their protections operate through carefully framed gateway conditions and time limited options. Here, the member had a two-year statutory right to transfer his SPLAS rights into the AMEC scheme and did not exercise it. The Court was unwilling to stretch the redundancy/reorganisation wording to apply when the TUPE transfer occurred as it would mean that there would be no opportunity to exercise the statutory right to transfer. 

Practical implications for scheme design and transactions: For trustees and sponsors, the judgment is a reminder to consider carefully any early retirement provisions (especially those imported from legacy or protected person regimes) to understand precisely when they bite and how they interact with TUPE transfers and group reorganisations.

Ian Paul McKavney v (1) Serco Group PLC, (2) Magnox Limited, (3) Amec First Wheeler PLC, (4) The Trustees of the Serco Pension and Life Assurance Scheme, (5) Nuclear Decommissioning Authority [2026] EWHC 508 (Ch)

Legislation, guidance and consultation

PASA guidance on administration risks in buy ins and superfund transactions

Outline

On 28 January 2026, the Pensions Administration Standards Association (PASA) issued practical guidance for trustees, administrators and advisers on handling the administrative and operational aspects of buy ins and superfund transfers. The guidance highlights common pressure points such as aligning scheme rules with insurer terms and dealing with deferred members (including changes to actuarial factors on early retirement or transfer), and suggests practical steps to mitigate these risks. The guidance is available here.

Comment

PASA notes that the operational realities of these transactions are often underestimated, particularly around the period immediately before and after closing, and challenges the assumption that administration "stops" once a buy in is in place. The Guidance aims to facilitate earlier dialogue between all parties to a transaction, emphasising collaboration and planning over a reactive approach.

Government response to the House of Lords Inheritance Tax ("IHT") reforms report

Outline

On 27 March 2026, the Government published its response to the House of Lords Economic Affairs Finance Bill Sub-Committee's report on IHT reform. By way of reminder, most unused pension funds and death benefits will be brought within the scope of IHT in respect of deaths occurring on and from 6 April 2027 - these changes have now been formalised in the Finance Act 2026 (see below).

Of the Sub-Committee's recommendations, the Government accepted 9 and partially accepted a further 31. Notably, the Government rejected calls to introduce a statutory safe harbour from late payment interest, to extend the six-month IHT payment deadline to 12 months for pension assets for a transitional period, and to implement a "soft-landing period" suspending penalties and late payment interest whilst the new rules bed in.

 The Government also confirmed in its response that regulations setting out the legal framework for information exchange between personal representatives ("PRs") and pension scheme administrators ("PSAs"), including mandatory response timescales, will be published and consulted on in Spring/Summer 2026. Further guidance and other materials will also be updated and published before the implementation of the new rules in April 2027.

Comment

The April 2027 start date for the IHT changes is confirmed, with no transitional relief. In practical terms, trustees should be working on the following as a matter of priority:

Rule reviews: identifying in-scope death benefits and considering any possible alternatives to mitigate IHT liability, as well as ensuring that scheme rules facilitate the withholding of benefits and direct payment of IHT to HMRC (this may require rule amendments).

Information-sharing readiness: preparing processes to receive and verify PR requests, respond within the obligatory timescales to be set out in the forthcoming regulations, and provide valuation and benefit information. HMRC will publish template documents and guidance that PSAs can adopt, but schemes should not wait for these before reviewing current workflows. In tandem, trustees may wish to review and update their administration agreements where appropriate.

Withholding and payment mechanisms: building operational capability to withhold pension benefits and make direct IHT payments to HMRC on a PR's instruction.

Member communications: identifying impacted populations and issuing communications, as well as updating existing member literature (e.g. scheme booklets and websites).

The Government's indicative timetable runs from draft regulations in Spring 2026 through to published guidance in Spring 2027, leaving a very narrow window for schemes to adapt. Trustees should keep a close watching brief on the forthcoming regulations and guidance, but should not delay preparatory work.

Regulator uses vesting powers to secure assets in Vedius Pension Trust case

Current Status and next steps

The Pensions Regulator (TPR) has published a Determinations Panel decision on the Vedius Pension Trust (determination dated 22 October 2025, published February 2026).

In April 2024, TPR appointed an independent trustee to the scheme under its powers in the Pensions Act 1995, following serious governance concerns. In particular, there was no trustee who both had sufficient trustee knowledge and understanding and was free from conflicts of interest. Because of the way those appointment powers operate, the scheme's assets did not automatically transfer to the independent trustee.

After appointment, the independent trustee encountered persistent non‑cooperation from the former trustee, including difficulties in obtaining scheme documents and in taking control of the scheme's assets. There was significant uncertainty about the nature, ownership and location of those assets, including alternative investments and disputed property interests, and much of the documentation was incomplete or poorly executed. TPR considered that this created material risks for scheme administration and member protection, and therefore applied for an order under section 9 of the Pensions Act 1995 to vest the scheme's assets in the independent trustee.

The Determinations Panel accepted that TPR could instead have sought a vesting order from the High Court under the Trustee Act 1925, but considered that route disproportionately costly given the scheme's reduced asset value. It concluded that using TPR's own vesting powers under the Pensions Act 1995 was necessary, proportionate and consistent with TPR's statutory objectives, and made an order transferring all scheme property, rights and interests to the independent trustee.

For more detail, see TPR's determination notice for the Vedius Pension Trust (22 October 2025), available here.

Comment

The decision underscores TPR's focus on trustee competence and independence, and the practical importance of choosing an appointment route that also secures control of scheme assets. It shows TPR will use its section 9 vesting power to avoid the cost and delay of High Court proceedings where that is more proportionate, especially for schemes with limited assets. For trustees and sponsors, it highlights the need for robust governance, clear documentation of asset ownership and cooperative handovers on any change of trustees.

Pension Schemes Bill 2025 receives Royal Assent (Pension Schemes Act 2026)

Outline

The Pension Schemes Bill 2025 has now received Royal Assent to become the Pension Schemes Act 2026. The Act makes a number of important changes to the pensions landscape. In relation to DB schemes the Act includes e.g.: (a) provisions to facilitate the return of surpluses to employers; (b) a regulatory framework for DB superfunds; and (c) provisions to enable schemes to remedy invalid alterations following the Virgin Media case. In relation to DC schemes, the Act includes e.g.: (a) a requirement for the default arrangements of master trusts that are being used for automatic enrolment to be "at scale" by 2030; (b) a power for the government to mandate the investment of default funds of master trusts that are being used for automatic enrolment into "qualifying assets"; and (c) a value for money framework and requirements to provide default decumulation arrangements.

The House of Lords proposed a number of amendments to the Bill during the Committee and Report stages, including removal of the government's broad mandation power to compel DC schemes to invest in certain assets. Accordingly, the enacted version of the Act includes a modified version of the investment mandation requirements. For example: (a) the threshold for the application of the "savers' interest test" (under which the Regulator may suspend the asset allocation requirements on application by trustees) has been lowered; (b) statutory caps have been introduced so that no more than 10% of default fund assets must be "qualifying assets" and no more than 5% need to be UK specific assets; (c) both direct and indirect holdings may be allowed for in the various mandated asset classes. During the House of Lords debates, the government also tabled a new amendment to empower the Secretary of State to issue statutory guidance on the meaning of certain investment related terms and provisions in the Pensions Act 1995 and associated investment regulations. The House of Lords initially rejected this amendment (concerns were cited in debate surrounding the politicisation of trustees' investment duties) but it was restored during the "ping pong" phase of the legislative process.

Comment

The progress of the Bill through parliament underscored an ongoing debate about the appropriate balance between government intervention and trustee autonomy in the UK pensions landscape. Most of the changes made by the Act are dependent on secondary regulations being made and trustees and employers should continue to monitor progress closely.

Virgin Media retrospective remedy

Outline

In July 2024 the Court of Appeal confirmed in the Virgin Media case that an amendment to a contracted-out salary related pension scheme between 1997 and 2016 was void unless there was written actuarial confirmation under section 37 of the Pension Schemes Act 1993 (s37 confirmation) that following the amendment the scheme continued to satisfy the statutory "reference scheme" test. 

This decision put the validity of many historical amendments in doubt because s37 confirmation was not included in the amending deed and it was unclear if it had been lost or had never been obtained. Where the amendment is void significant additional costs could arise to scheme sponsors and in the Virgin Media case the liability exceeded £10 million as the s37 confirmation for a revaluation amendment could not be found. 

The Government decided to provide clarity on the matter by providing a statutory remedy in these cases. Under sections 101-104 of the Pension Schemes Act 2026 trustees can request the current scheme actuary to confirm in writing that he considers it is reasonable to conclude, on the assumption an amendment was otherwise was validly made, that the amendment would not have prevented the scheme from continuing to satisfy the reference test.  If the actuary can give this retrospective confirmation, then the amendment is treated as validly made for the purposes of section 37. 

In anticipation of these provisions coming into force the Financial Reporting Council (FRC) issued technical guidance in January 2026 to assist actuaries on whether to provide confirmation under sections 101-105.  Whilst the guidance is for primarily for actuaries it is also helpful to trustees and scheme sponsors who are concerned that amendments to their scheme may be void under section 37 as it indicates the information and data the actuary may request to provide the confirmation as well as numerous examples of where confirmation would be given or refused.  The Pensions Regulator also published guidance in March 2026 for pension scheme trustees suggesting that they should consider if their scheme is affected and, if so, whether to seek retrospective confirmation.

Comment

Whilst the guidance issued to date is helpful, the industry is still waiting for the judgment in the Verity Trustees case which should provide much needed further clarity on what types of amendment actually required s37 confirmations. We now understand the ruling is expected in Q2 2026.

National Insurance Contributions (Employer Pensions Contributions) Act 2026 - salary sacrifice NICs cap

Outline

The National Insurance Contributions (Employer Pensions Contributions) Bill received Royal Assent on 29 April 2026, thus becoming the National Insurance Contributions (Employer Pensions Contributions) Act 2026. The Act gives the Treasury power to, from 2029 onwards, impose primary and secondary Class 1 NICs on salary sacrificed for employer pension contributions where the sacrificed amount exceeds a prescribed annual limit. This enacts the Autumn Budget 2025 proposal to cap the NICs exemption for pension salary sacrifice, with the government having previously indicated that the first regulations would set a £2,000 per tax year limit.

Comment

The detail of the policy will come out in the secondary legislation, which the Financial Secretary to the Exchequer stated would be made "in good time" before 2009.

Employers will want sight of the Regulations before making detailed changes to their salary sacrifice arrangements, but it is very likely that the attractiveness of such arrangements will decrease for higher earners.

Finance Act 2026 Published

Outline

The Finance Act 2026 received Royal Assent on 18 March 2026 and was published on 23 March 2026. Pensions‑related provisions include:

Lifetime allowance (LTA) - the Act refines the existing power for HM Treasury to make further regulations on the abolition of the LTA. It now: (i) allows those regulations to take effect from 6 April 2024, even if they are made later; (ii) makes clear that they can include transitional provisions of the kind already permitted elsewhere in Schedule 9 to the Finance Act 2024; (iii) requires all future regulations under this power to be approved by the House of Commons; and (iv) extends the deadline for using the power to 30 June 2026. 

Collective money purchase (CMP) schemes - the Act creates a clearer tax registration framework for unconnected, multi‑employer CMP schemes. These schemes can now apply to HMRC to be registered, and HMRC has explicit powers to refuse or withdraw registration where a CMP scheme does not satisfy the conditions, with a more flexible mechanism to adjust the tax rules for CMP schemes in future. 

Inheritance tax (IHT) on pension death benefits - from 6 April 2027, most pension and lump‑sum death benefits paid from registered pension schemes will be within the scope of IHT. The Act amends the Inheritance Tax Act 1984 and related pensions tax provisions, including adding a new authorised payment type so that IHT paid directly to HMRC by a scheme administrator in respect of these benefits is treated as an authorised pension payment for tax purposes.

Comment

The Act largely fine‑tunes existing reforms rather than changing policy direction. The expanded lifetime allowance regulation‑making power gives HM Treasury limited extra scope and time to resolve technical issues with abolition, under closer Commons scrutiny. The CMP provisions put unconnected, multi‑employer collective schemes on a clearer tax registration footing as that market develops. The IHT measures are likely to have the greatest practical impact, confirming that most pension death benefits will fall within the IHT regime from April 2027 and ensuring scheme‑paid IHT can be treated as an authorised payment, which schemes will need to factor into benefit design and communications. See details on the Finance Act 2026 here.

TPR updates pensions dashboards guidance and publishes market oversight report

Outline

The Pensions Regulator (TPR) has updated its pensions dashboards guidance. The guidance now includes best practice insights and two practical checklists, one for schemes still working to connect, and one for schemes already connected.

TPR has also issued a market oversight report on the 51 largest occupational schemes, which are expected to hold around 80% of dashboard records. It finds that preparations on personal and matching data are generally more advanced than on value data, where significant work remains. Schemes must be able to provide accurate, up‑to‑date values immediately or, if recent values are not available, within 3 days for DC benefits and 10 days for other benefits. Although most schemes have data controls in place, their sophistication varies and many need to embed ongoing data quality monitoring and assurance into business‑as‑usual processes.

TPR Dashboards Lead Lucy Stone warned that schemes not connected by the deadline can expect to hear from TPR, with a "robust enforcement approach".

Comment

This guidance confirms that dashboards are a regulatory priority, with TPR's attention shifting from connection alone to the quality and timeliness of value data.. TPR's emphasis on continuous data quality monitoring, will require many schemes to upgrade systems, processes and governance.

Trustees should keep dashboards as a standing agenda item, seek regular, substantive reports from administrators, AVC providers and connection providers. Those that do not make progress risk potential enforcement action as the 31 October 2026 deadline approaches.

For more detail, see here:

Pensions dashboards: are schemes ready for the next step?

Market oversight: Pensions dashboards

At a glance updates

PPF to charge no levy on standard DB schemes in 2026/27

Outline

On 26 February 2026, the Pension Protection Fund (PPF) confirmed that "conventional" schemes will not be charged a levy for the 2026/27 year, although a levy will continue to apply to "alternative covenant schemes" (ACSs), including DB superfunds. The PPF is satisfied that changes in the Pension Schemes Act 2026 will preserve flexibility to re‑impose a meaningful levy in future. 

Although the PPF accepts that DB superfunds currently present only a limited risk, it stresses that this is a fast‑evolving market. For 2026/27 it expects the ACS levy to be small relative to ACS liabilities and aligned with the level of risk, and it will bring forward its review of the ACS methodology from 2027/28 to help ensure the levy remains appropriate. The PPF will continue to calculate an annual levy estimate but will no longer publish the figure, to protect the confidentiality of the small number of ACSs that remain subject to the levy.

Comments

The zero levy is a clear saving for most DB schemes, but trustees must continue to provide core data to the PPF and the Pensions Regulator.  Trustees may wish to reassess what optional information they submit in light of the revised data requirements.   ACS sponsors should expect a continuing levy and engage with the PPF's forthcoming review of the ACS methodology.

HMRC publishes pension scheme newsletters 178 & 179

In February and March, HMRC published pension scheme newsletters 178 & 179.

Newsletter 178 (February 2026) explains that HMRC is preparing transitional regulations under the Finance Act 2022 to support the increase in normal minimum pension age from 55 to 57 on 6 April 2028, and reminds scheme administrators of the rules and data‑sharing obligations around protected pension ages on transfers, urging them to ensure records are accurate ahead of the change. Newsletter 179 (March 2026) reminds practitioners that, from 6 April 2026, all scheme administrators of UK-registered pension schemes must be UK resident, and provides further detail on the change.

FCA annual work programme 2026/27

The FCA's 2026/27 work programme (year two of its 2025-2030 strategy) is structured around four themes: being a "smarter" data‑led regulator, supporting growth, helping consumers navigate their financial lives, and fighting financial crime. Key cross‑cutting work includes taking on the Payment Systems Regulator's functions and overseeing the proposed motor finance redress scheme. Priorities include greater use of AI and digital tools in supervision, developing open banking/open finance and fund tokenisation frameworks, a provisional licence regime and wider support for high‑growth firms, further work on the advice/guidance boundary and workplace pensions value, and enhanced data‑driven detection and disruption of financial crime.

For more detail, see here.

DC Updates

FCA expands AI live testing to pensions and retirement services

Outline

The FCA has announced its second AI Live Testing cohort, which includes Scottish Widows. Although the FCA regulates contract-based products, the move is also relevant for occupational schemes, many of which rely on FCA‑regulated firms for administration, platforms and member‑facing tools.

A key use case highlighted by the FCA is AI‑enabled targeted support for investments, leading to more sophisticated, data‑driven nudges on contributions, investment choices and retirement decisions. AI greatly enhances the ability to personalise support at scale but also sharpens the boundary question of when such support becomes regulated advice, an issue that pension providers and schemes will need to monitor closely.

Consumer Duty will sit at the centre of AI deployment. AI tools used in member communications will need to demonstrably improve member outcomes. For Trustees, this raises expectations around data quality, accessibility and data sharing, as AI systems depend on reliable, standardised inputs.

Comment

The inclusion of a major provider in the FCA's AI Live Testing is a clear signal that AI‑driven tools will increasingly shape pension communications and member support, including for trust‑based schemes via their third‑party providers. Trustees should expect more personalised, data‑driven nudges to become the norm and should engage early with providers on how AI is being used.

For more detail, see here: FCA announces second cohort for AI Live Testing | FCA

Targeted support regime comes into force

Outline

The full targeted support regime came into force on 6 April 2026. The regime allows FCA‑regulated pension and investment providers to give more tailored help by making recommendations designed for groups of consumers with similar characteristics and circumstances, without this being treated as "advising on investments".

The FCA has published rules on out how targeted support must be designed, delivered and communicated, the governance and record‑keeping standards firms must meet. It has also issued statements on how complaints about targeted support will be assessed and on how targeted support communications sit within existing direct marketing rules.

Comment

As targeted support is rolled out by FCA‑regulated firms, its effects will extend to trust‑based schemes that rely on those firms for platforms, decumulation products and member‑facing tools. Trustees should understand how their providers intend to use targeted support and how the advice/guidance boundary will be managed in practice. In combination with dashboards and AI‑enabled tools, the regime is likely to reshape pension communications and member decision‑making, making it important for schemes to review oversight and governance arrangements.

Pensions Regulator: defined contribution landscape review shows further consolidation

Current Status and next steps

The Pensions Regulator (TPR) has published its annual review of the UK defined contribution (DC) landscape, based on 2025 scheme return data. The review shows continued consolidation in the DC market, with the number of DC schemes falling by around 15% in a year (from 920 in 2024 to 790 in 2025), mainly among non‑micro schemes with fewer than 5,000 memberships. Over the same period, total DC memberships rose from 30.6 million to 32.8 million, with deferred members now accounting for around 65% of all DC memberships - a 9% increase on 2024. Master trusts now dominate provision, holding approximately 92% of DC memberships and 83% of total DC assets.

Commenting on the findings, TPR reiterated its view that larger schemes are better placed to deliver value for money through stronger investment performance and better services. Trustees of smaller schemes are being urged to reassess whether their scheme can genuinely compete with larger providers and, where not, to consider consolidation in members' interests.

Comment

The decline in the number of DC schemes comes as no surprise and continues the trend seen over the last few years. We can only see this being maintained, with the introduction of the new value for money requirements in the Pension Schemes Act 2026 acting as a further driver towards consolidation.

The high proportion of deferred members illustrates that individuals are increasingly likely to have more than one pot. The introduction of the pension dashboard and the Pension Schemes Act provisions on the consolidation of small dormant pots should assist members in keeping track of their pension entitlements.

TPR updates on capital reserving expectations for master trusts

Outline

On 20 March 2026, the Pensions Regulator (TPR) published revised guidance on master trust capital reserving requirements. The changes form part of a wider move to streamline regulation while maintaining member protection, and come after HM Treasury's update on its March 2025 action plan to ensure regulators and regulation support growth. The guidance, which sits alongside the existing Master Trust Regulations and Code of Practice 15 on authorisation and supervision of master trusts, takes a more scheme‑specific approach to calculating reserves and covers areas such as liquidity requirements, revenue offsetting and other regulatory regimes.

Comment

Authorised master trusts may wish to review their capital plans against TPR's updated expectations, considering whether they can responsibly reduce reliance on cash and make greater use of revenue offsetting or other assets while still demonstrating credible contingency planning and ongoing financial resilience.

Pensions Regulator seeks feedback on VFM framework joint discussion paper

Outline

On 22 January 2026, the Pensions Regulator (TPR) published an overview of the joint discussion paper with the FCA on the proposed value for money (VFM) framework for defined contribution (DC) pensions across both trust‑based and contract‑based arrangements. A copy is available here.

For contract‑based schemes, the framework is being delivered through FCA rules. For trust‑based schemes, measures in the Pension Schemes Act 2026 will enable the DWP to make detailed regulations.

There have been a series of consultations on a common VFM framework in recent years and key features of the current proposals contained in the joint discussion paper include:

Scope: The framework will apply to all master trusts and most single‑employer DC schemes (excluding executive pension plans and small self‑administered schemes).

Three metric categories: Trustees must assess scheme performance against:

• investment metrics;

• costs and charges information; and

• quality of service data.

Three‑step assessment: Trustees compare their arrangement against selected commercial comparators and determine whether it is providing VFM. Where it is not, trustees must:

• notify the employer;

• in the case of multi‑employer schemes, close the arrangement to new business; and

• prepare and submit action or improvement plans to TPR.

TPR highlights three refinements to earlier proposals:

Four‑band rating system: VFM outcomes would be graded red, amber, light green and dark green (with dark green indicating strong performance and light green indicating good, but not top‑tier, value for money).

Forward‑looking investment metrics: In addition to backward‑looking data, schemes would report forward‑looking indicators of investment performance.

Centralised VFM database: Trustees would submit VFM metrics annually to a central database by the end of March and publish their own assessment report by the end of October.

The DWP is expected to consult on draft VFM regulations in 2026/27, with the first statutory VFM assessments expected in 2028.

Comment

The latest proposals underline that VFM will be a key regulatory tool, not just a disclosure exercise. The combination of mandatory metrics, prescribed comparators and a centralised database gives TPR and the FCA a much clearer line of sight across the DC market, and creates a structured route from poor VFM findings to regulatory outcomes (closure to new business and mandated improvement plans).

For trustees, three aspects are particularly significant:

Granularity and signalling: Moving from three to four ratings (with separate "light" and "dark" green bands) should make it easier to distinguish genuinely high‑performing schemes from those that are merely adequate, but still compliant. That extra granularity is likely to increase pressure on arrangements to improve, especially once ratings become comparable across the central database.

Governance of forward‑looking metrics: Introducing forward‑looking investment measures pushes schemes towards more sophisticated modelling and a clearer articulation of investment beliefs and risk appetite. Trustees will need to be comfortable with the assumptions driving those projections and ensure their governance and advice framework is robust enough to defend them if challenged by TPR.

Data infrastructure and consolidation pressure: Annual reporting to a central database by March, followed by publication of a VFM assessment by October, demands reliable data flows and repeatable processes. For smaller schemes - already facing dashboard, data quality and consolidation expectations - this is another nudge towards questioning whether they can credibly meet VFM requirements on a standalone basis or should instead transition to a larger master trust.

The overarching trend is clear: DC trustees will be expected to evidence that members are receiving good value by reference to consistent, comparable metrics - and, where they are not, to act decisively. Schemes will need to ensure that VFM pervades everything they do and is not treated as a once‑a‑year compliance exercise.

FCA and ICO clarify use of vulnerability data for pension outcomes

Outline

The FCA and ICO have issued a statement confirming that data protection law does not prevent firms from identifying and supporting vulnerable customers in line with the Consumer Duty. Firms can record and use vulnerability‑related information where necessary to deliver good outcomes, provided they comply with UK GDPR. The regulators expect vulnerability to be actively identified throughout the member journey, particularly around retirement decisions, transfers and life events. Firms should monitor outcomes to check whether vulnerable members are experiencing poorer results.

The statement also highlights the need for appropriate information‑sharing across the pensions "distribution chain" (trustees, providers, administrators and advisers) to support vulnerable members.

Comment

For pensions, this removes a common perceived barrier to using vulnerability data and reinforces that trustees and providers are expected to use the data they already hold to identify and support vulnerable members. Schemes should review how vulnerability is captured, shared and acted upon across their provider chain.

For more detail, see here: Joint FCA and ICO statement on regulatory expectations regarding firms' approaches to vulnerability related data | FCA

TPR sets DC innovation priorities for pensions system transformation

Outline

In a March 2026 speech, The Pensions Regulator's (TPR) Chief Executive Nausicaa Delfas set out a DC‑focused innovation agenda as part of a wider shift to a more system‑wide regulatory approach.

A central pillar is the forthcoming value‑for‑money (VFM) framework, which is intended to move decision‑making away from cost alone towards long‑term outcomes and investment performance. The inclusion of a forward‑looking metric is designed to support greater use of growth assets. TPR will also publish a report in spring 2026 on barriers and opportunities in private market investment, reflecting growing interest in assets such as infrastructure.

Default retirement plans are another priority area. Linked to the guided retirement duty, TPR wants to see simple, effective defaults at decumulation, with scope for differentiated glidepaths or options for identifiable member groups (for example, those with career breaks). Retirement‑only CDC schemes will form part of this landscape, in line with the government's intention to legislate later this year.

Finally, Delfas placed administration and technology on an equal footing with investment. TPR expects trustees to work with administrators to improve data quality and resilience and prepare for increased member scrutiny via dashboards. Working with the FCA, TPR will develop a regulatory approach to AI across workplace and personal pensions and plans to publish an AI action plan in May 2026.

Comment

For DC schemes, the speech confirms TPR's direction of travel, a stronger emphasis on value for money and growth assets, more guided default retirement solutions (including potential use of CDC), and higher expectations of technology. Trustees and administrators should be well-underway with their response to the VFM framework, access to private markets, design guided retirement defaults and deployment of AI in a way that can improve member outcomes.

For more detail, see here: Innovation in the new pensions era

Pensions Regulator blog urges DC trustees to take action on consolidation as new guidance published

Outline

TPR has published a blog (and accompanying guidance on consolidation and winding up) urging trustees of smaller DC schemes to take proactive steps on consolidation where they cannot demonstrate good value for members and robust governance, highlighting master trusts and other large schemes as likely consolidation destinations.

For more detail, see here: DC scheme consolidation: why trustees must take action now.

Comment

Trustees are expected to carry out and document a meaningful value‑for‑money assessment and, where standards are not met, to actively plan for consolidation rather than waiting for regulatory challenge.

TPR urges DC schemes to design default retirement solutions around real world contribution patterns

Outline

The Pensions Regulator (TPR)  has stressed that default retirement solutions should be designed with real contribution patterns in mind. Drawing on evidence that uneven earnings, caring responsibilities and career breaks materially affect outcomes.

TPR encourages trustees to use existing data (such as contribution histories, pot sizes and age profiles) to identify clear cohorts where modest differentiation in defaults could improve results, analogous to how schemes already use lifestyling.

Comment

The blog reinforces that guided retirement duties will not be satisfied by a one‑size‑fits‑all default. DC trustees should start analysing their own membership data to identify cohorts and consider whether differentiated glidepaths or default options could address these patterns in a proportionate way. This will be an important part of demonstrating that default retirement solutions are genuinely designed to deliver good outcomes for the scheme's actual savers, rather than an "average" member who may not exist in practice.

For more detail, see here: People's lives are different - we must understand savers to design defaults for retirement

FCA Regulatory Priorities: Pensions - 2026 focus and timetable

Current Status and next steps

In March 2026, the FCA published its first annual Regulatory Priorities: Pensions report, setting out its areas of focus for life insurers, SIPP operators, investment platforms, advisers, wealth managers and asset managers involved in pension business. The report sits alongside the FCA's wider sectoral priorities and is intended as a "one‑stop shop" guide for senior management. It is explicitly framed through the lens of the Consumer Duty and is designed to complement The Pensions Regulator (TPR) and DWP initiatives so that consumers experience consistent outcomes across contract- and trust‑based pensions.

Key themes include:

Ensuring well‑run schemes that provide value for money (VFM) to savers

• Together with TPR, the FCA is developing a new VFM framework to apply consistently across pension schemes, with a particular focus on workplace DC and scale. Providers are expected to plan now for schemes that may not be delivering value and to prepare for an upcoming "scale test".

The FCA will:

• run a final consultation in Q2 2026 on rules for the VFM framework; and

publish a VFM policy statement with final rules in Q4 2026, allowing firms time to implement system changes before the planned 2028 launch.

Encouraging effective support for consumers

• The FCA is progressing the Advice Guidance Boundary Review and a new targeted support regime so firms can offer more personalised, non‑advised support to consumers.  A consultation on simplifying and consolidating investment advice rules also commenced in March 2026.

The FCA will also:

• publish a retirement journeys discussion paper in Q2 2026, focused on guided retirement solutions in workplace contract‑based pensions ;

• finalise new rules on interactive digital pension planning tools and non‑advised DC transfers, with a policy statement expected in H2 2026;

• supervise firms as they implement targeted support from H2 2026; and

• continue joint work with the Pensions Dashboards Programme and DWP on private sector dashboards.

Supporting growth and innovation

• The FCA wants to remove unnecessary barriers to investment in private assets while maintaining strong controls and consumer protection.

• In Q2 2026, the FCA will consult on allowing flexibility to charge higher performance fees where this can demonstrably lead to better performance, subject to appropriate consumer protection.

Modernising pensions and long‑term savings

• The FCA highlights legacy issues such as ageing systems, difficulties contacting "goneaway" customers, product and administration complexity and challenges for with‑profits funds as barriers to better outcomes and innovation. It is seeking active engagement from firms and other stakeholders on how to address these.

Timetabled activity includes:

• launching external engagement and roundtables on longstanding issues in Q2 2026; and

• consulting in H1 2026 on rules for SIPP operators' due diligence obligations and handling of pension scheme money and assets

Other areas of focus

• The FCA will continue to support delivery of measures in the Pension Schemes Act 2026 and work with TPR to maintain alignment between contract- and trust‑based regimes.

• The FCA is encouraging firms to experiment with AI (including through sandbox services and live testing) and will publish an evaluation report from AI Live Testing by the end of 2026.

Comment

This Regulatory Priorities report represents an evolution in how the FCA communicates with pensions firms and provide a regulatory roadmap for pension providers.

The clustering of major consultations and publications into Q2 and H1 2026 will place real pressure on firms' policy and governance resource.  The long lead time to the planned 2028 VFM "go‑live" should also not be read as licence to defer action: the FCA explicitly signals that schemes unlikely to be providing value should be assessing what changes will need to be made.

There is also a clear interplay between the FCA's growth and VFM agendas. The planned consultation on exempting performance fees from the charge cap is framed as a way to unlock investment in private assets, but it sits alongside a focus on Consumer Duty outcomes.

Finally, the modernisation strand signals a willingness to tackle structural problems that can hamper both consumer outcomes and firms' ability to innovate. By inviting industry input, the FCA is opening a window for firms to help shape proportionate solutions - but it may be sometime before we see changes to the regulatory regime on these issues.

UK Pensions Horizon Scanning

A reminder of key upcoming developments in the UK pensions space

2026 developments

Collective Defined Contribution ("CDC") Schemes Regulations and updated TPR Code of Practice

Regulations extending collective defined contribution (CDC) provision to unconnected multi-employer schemes and TPR updated Code of Practice are set to come into force on 31 July 2026.

2026 onwards

31 October 2026

Pension dashboards.

Mandatory final connection deadline for all in-scope schemes.

2026/27

DWP and FCA consultations on draft guided retirement regulations and rules likely to be published; final regulations and rules likely to come into force.

Early 2027

Master trusts likely to become subject to guided retirement duties.

6 April 2027

Inheritance Tax changes for pensions.

Payment of DB surplus direct to members permitted.

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.

6 April 2029

Salary sacrifice changes come into effect.

Amount that is exempt from National Insurance contributions (NICs) will be capped at £2,000 a year for employee contributions made via salary sacrifice.

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

Mansion House Accord - 2030

Seventeen defined contribution pension scheme providers express their intent to invest at least 10% of their DC default funds in private markets by 2030, with 5% of the total allocated to UK private markets.