Pensions Planner - Autumn 2025

Introduction

Where to start? This edition of the Planner covers more than 50 different announcements and publications, but pride of place must go to the far-reaching Pension Schemes Bill.

Debate in the House of Commons focussed on the Bill's provisions about access to surplus and "mandation". The provisions about surplus, in so far as they go, are straightforward and pragmatic; the Government has, as promised, included a fundamental safeguard, namely that any access to surplus will be subject to trustee consent. Industry eyes will be on two things yet to come: a consultation on the relevant funding test, and guidance for trustees from The Pensions Regulator. Clues as to TPR's thinking can be found in a recent publication about new models and options for DB schemes.

Via the mandation provisions, the Government (or a successor) could compel master trusts and GPPs to invest in prescribed asset classes. But the Pensions Minister has said that this is a reserve power, which the Government does not expect to use. Mandation will be considered only if there is insufficient progress against goals in the new Mansion House Accord. The Government will be monitoring progress closely; from next year, major providers will be asked to supply (voluntarily) information about their asset allocations.

Whilst mandation might never happen, the Government is clear that there will be a minimum size requirement for master trusts and GPPs – £25bn from 2030. The size requirement will apparently apply at the "default arrangement" level, but how this will work is unclear. A key term used in the Bill, "common investment strategy", has not yet been defined.

There are unknowns, too, about guided retirement. DC members certainly need greater support with decumulation. However, designing suitable "default pension benefit solutions" will be challenging, because different members will have different needs and aspirations. Thankfully the Government accepts that, in some cases, a scheme might partner up with another (probably larger) scheme, with the partner scheme providing the "solution".

Some of the current concerns about the Bill will no doubt be addressed via amendments at the Committee stage. And it seems that a further provision will be added, following the Government's promise of legislation to address issues arising from the Virgin Media case. Two years have passed since the original, High Court, judgment. The many DB schemes affected will hope for a straightforward mechanism, such that they can resolve "section 37" uncertainties and move on.

Looking further ahead, a new Pensions Commission is to consider adequacy and fairness. Government figures demonstrate the scale of the challenge, with 39% of people under-saving for retirement, and many, particularly the low-paid and self-employed, not saving at all. But don't expect a quick fix: the Commission is to publish its final report in 2027, with "proposals for change beyond the current Parliament".

Recent developments

DC providers sign Mansion House Accord

17 major DC providers set out their investment ambitions in a new Mansion House Accord . The Accord builds on the 2023 Mansion House Compact, but does not replace it – the two will run side-by-side.

Under the Compact, 11 providers aim to invest at least 5% of default fund assets in unlisted equities by 2030 . The Accord goes further . Signatories aim to invest at least 10% of default fund assets in private markets by the 2030 target date, with at least 5% of the total to be invested within the UK . In-scope assets include property, infrastructure, private credit, private equity and venture capital.

Like the Compact, the Accord is not legally binding . Two caveats feature prominently:

• The ambitions of signatories are subject to their fiduciary duties or consumer duty, as applicable
• •Delivery will depend on "critical enablers", including an adequate investment pipeline and a suitable new value-for-money framework and "minimum size" regime.

Comment: The Government, with its productive investment agenda, will chalk this up as a success. The signatories to the Accord account for about 90% of workplace DC assets . If they deliver on the Accord then, by 2030, their overall allocation to private markets could be as high as £50bn.

Pensions investment review – final report

The Government published the final report on phase 1 of its pensions review, and associated consultation responses covering DC scale and consolidation and and

The Government will not (for the time being) take forward two other ideas which it had been considering:

The Government published a response to the previous administration's "Options for DB schemes" consultation.

The response confirmed that, as indicated in January 2025, the Government would facilitate access to surpluses .

The Government has decided against offering a "full PPF underpin" option for well-funded schemes

The Government will not, for now, legislate for there to be a public sector DB consolidator . However, it will continue to explore the idea of a "small, focused" consolidator for hard-closed schemes, run by the Pension Protection Fund but separate from the compensation arrangement.

Comment: The consultation response suggests a potentially wider role for a public sector consolidator: it might be an endgame option not only for underfunded schemes, but also for well-funded but small schemes which were unattractive to insurers.

DC scale and asset allocation

From 2030, master trusts and group personal pension schemes used for auto-enrolment will generally need to be approved, by a relevant regulator, in respect of a "main scale default arrangement" and any prescribed "asset allocation requirement".

For main scale default arrangement purposes, the total value of assets which are "managed under a common investment strategy" must be at least £25bn . Importantly, there is an aggregation provision . A scheme can effectively aggregate assets which are managed under the same common investment strategy under other schemes of the provider (either GPPs or a master trust, with the proviso that only one master trust can count overall) . Sub-scale schemes will be able to apply for easements as follows:

• "transition pathway relief": if in-scope assets are at least £10bn, and there is a credible plan to reach £25bn by 2035; and
• "new entrant pathway relief": if there is strong growth potential and an ability to innovate.

For asset allocation purposes, regulations may be made whereby a specified percentage of total scheme assets must be "qualifying assets" . Qualifying assets are assets of a prescribed type (eg private markets and/or UK assets) which are held within default funds . The Government does not currently intend to use the asset allocation power (see above), and would be required to commission a report on potential impacts if it was minded to do so.

The authorisation criteria for master trusts will be changed, so as to require trusts to have appropriate investment governance systems, including strategies to recruit and retain expert staff.

Value-for-money

There are measures to extend any new value-for-money framework to trust-based DC schemes.

Regulations may require trustees of specified schemes to carry out VFM assessments using prescribed metrics; publish and share the results; and assign a VFM rating . Assessments may involve comparisons with other schemes or with benchmarks . Trustees may be required to carry out member satisfaction surveys.

Ratings will be on a prescribed basis, from "fully delivering" to "not delivering", with one or more intermediate ratings . If a scheme is "not delivering", no new employers may be admitted and the trustees will be required to submit an action plan to The Pensions Regulator, with powers for TPR to mandate a transfer to another scheme . In "intermediate" cases, regulations may, among other things, require trustees to submit an action or improvement plan

The Government envisages that assessments under the new framework will start in 2028

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