Pensions Planner - Autumn 2026

Introduction

The most significant development this quarter is arguably the Government's updated roadmap, which provides a fresh indication of when the various reforms under the Pension Schemes Act 2026 and beyond are likely to take effect.

For DB schemes, the major reform is "surplus sharing". Here the Government is ahead of schedule. Soon after the new Act was passed, it published draft regulations and a consultation on the conditions for refunds from ongoing schemes, with implementation planned for April 2027, several months sooner than originally proposed. Within the consultation, there are few surprises. As expected, the proposed funding test is based on low-dependency rather than buy-out funding, albeit with a forward-looking element.

On the DC side, progress has been patchy. We have – at last – a final consultation on the proposed new VFM framework, but implementation will be on a phased basis, with many schemes not conducting their first assessments until 2029. Meanwhile, the target dates for guided retirement have slipped by two years, and a policy paper recently published tells us little about the eventual shape of the regime. A similar picture emerges in relation to the DC "scale" requirement. The Government has set out initial thinking on aggregation for the purpose of the £25bn test, but much of the detail remains for another day.

Meanwhile further reforms have been announced. This Planner covers proposed changes to the transfer "flags" regime and the general levy. We also highlight guidance from HMRC on new rules about pension costs and VAT.

Looking beyond the current programme, the Pensions Commission's interim report offers clues as to where the next generation of reform may lie. Auto-enrolment contribution rates remain an obvious focus, but the report flags wider concerns, as to voluntary saving levels, early retirement trends and decumulation.

For trustees, sponsors and providers, the immediate challenge is keeping pace with an evolving reform agenda. The longer-term question may be more fundamental: are people working for long enough, and saving sufficiently, to ensure a comfortable retirement?

Recent developments

Updated roadmap sets out timetable for reforms

The Government updated its workplace pensions roadmap. The roadmap outlines planned steps and dates for pensions reforms, including those provided for in the Pension Schemes Act 2026. There are timelines for DC and DB schemes respectively.

Many of the target implementation dates are the same as in the previous (August 2025) version of the roadmap. However, there are several changes:

• DB surplus flexibilities: The proposed implementation date is April 2027, ahead of the original "late 2027" target.
• Superfunds: The Government plans to implement the new regime in Q4 2028, rather than in April 2028 as originally proposed. The postponement is in part to ensure that "market developments" can be considered.
• VFM: The new framework will be phased in over 2028/29, as explained below.
• Retirement CDC: The target for launch of the proposed R-CDC regime is Q4 2028.
• Guided retirement: The Government now plans for the new requirements to apply to master trusts and group personal pension schemes from Q3 2029, and to own-trust schemes from Q3 2030.

Comment: The launch dates for guided retirement have been pushed back significantly. The dates originally proposed always seemed ambitious, and, judging by the Government's recent paper on "guiding principles" (see below), little progress has been made towards implementation.

Government consults on surplus sharing

The Government launched a consultation (with draft regulations) on DB surplus sharing. The Pensions Regulator published an associated statement.

These developments follow the passing of the Pension Schemes Act 2026. Section 9 of the Act will allow trustees to modify ongoing DB schemes by resolution, to give themselves a refund power or to remove restrictions on an existing power.

The proposed regulations set out conditions for all refunds from ongoing schemes, whether or not pursuant to section 9. Under the regulations:

• The funding test for refund purposes is, as expected, low-dependency, rather than the current buy-out.
• A process for refunds is prescribed. Among other things, trustees must obtain an actuarial assessment and advice, consult the employer and obtain its consent, and give members three months' prior notice of the refund and any associated benefit improvements.
• A refund may be made only if the actuary certifies that, allowing for the refund and any benefit improvements:
  • the scheme is in surplus on a low-dependency basis; and
  • the scheme is "at least as likely as not" to remain in surplus on that basis throughout the following three years.
• Where a refund is made, trustees must notify TPR of the refund, the scheme's funding position and any benefit improvements.

TPR's statement provides "early views" on principles which trustees will need to consider for surplus sharing. Points made include the following:

• Trustees may want to retain a buffer above low-dependency. The size of the buffer should be determined in an integrated way, taking account of investment strategy and the employer covenant.
• Members may expect to benefit from surplus sharing; this is likely to "feature in discussions" between trustees and employers. TPR suggests factors which trustees might consider.

The new regime (section 9 and the proposed regulations) is expected to come into force in April 2027. The Government's consultation closes on 2 September 2026. TPR plans to publish further guidance before the end of the year.

Comment: The proposed conditions for refunds are pragmatic. An actuarial assessment will be required, but not a full valuation; members will need to be informed, but not consulted; TPR will have to be notified after the event, but will have no prescribed role in the process.

Further detail and comment can be found in our blog post.

Tax measures proposed for member surplus payments

HMRC published a proposed change to tax legislation to cater for lump sum payments to members from DB surplus, and an explanatory policy paper.

The proposed change provides for a new type of authorised payment for tax purposes – an "authorised member surplus payment" – as announced in the Autumn 2025 Budget.

Broadly speaking, a benefit paid by a DB scheme will be an authorised member surplus payment if:

• the decision to grant the benefit is made at the discretion of the trustees;
• when the benefit is granted, the scheme is ongoing, and the conditions for an authorised employer surplus payment are met; and
• the payment is made to a member who has reached normal minimum pension age or meets HMRC's ill-health condition, or to a dependant following the death of a member.

An authorised member surplus payment will be taxable as pension income in the hands of the recipient.

To avoid confusion, the term for authorised payments to employers from DB surplus will be changed to "authorised employer surplus payments".

The proposed change will be made via the 2026 Finance Bill, and will apply to payments made from April 2027 onwards.

Comment: Note that, broadly speaking, authorised member surplus payments can be made only to members who have reached normal minimum pension age. Rights can however be granted to younger members, for payment once NMPA has been reached.

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