Pensions Planner - Winter 2025

Introduction

Steady progress for the Pension Schemes Bill in the House of Commons. Committee stage was completed ahead of schedule. And even the most controversial provisions of the Bill emerged intact, with Pensions Minister Torsten Bell later urging the industry to "chillax" about measures to allow mandation.

The big change to the Bill so far has been the addition of Virgin Media provisions. Two years on from the initial High Court ruling, DB trustees and sponsors now have a clear idea about how historic uncertainties can be resolved. Guidance has been promised, to support actuaries in providing retrospective confirmation.

While the Bill's framework is taking shape, much of the underlying detail remains unclear. For DB schemes, the main question concerns the funding test which will apply for surplus refunds. The Government said in May 2025 that it was "minded to" prescribe a low-dependency test, but encountered some resistance. Proposals are expected shortly.

On the DC front, the priority must surely be guided retirement. For master trusts, the new regime is to apply from 2027, but key elements are as yet "to be prescribed". In the meantime, a further variable has been thrown into the mix. The Government has launched a consultation on a potential new decumulation vehicle – "retirement collective defined contribution".

A retirement CDC scheme would pool pots from retiring DC members, invest collectively, and pay lifetime pensions (not guaranteed). The consultation seeks input on fundamental issues such as required scale and the risk of regulatory arbitrage. But two policy decisions seem to have been made already: providers will need to be authorised master trusts or whole-life CDC schemes; and the market will be "wholesale only", with no direct access for individual savers. These are significant calls, and may prove controversial.

Recent developments

Pension Schemes Bill moves forward

The Pension Schemes Bill completed the committee stage in the House of Commons.

All amendments proposed by the Government were approved, including:

• measures to address issues arising from the Virgin Media case (see below);
• measures to drive the consolidation of sub-scale default arrangements under GPPs and master trusts; and
• various minor corrections, clarifications and improvements.

All proposed opposition amendments were withdrawn or defeated. The Government did however indicate that it would draft an amendment to cover one point which the opposition had raised, namely that the PPF administration levy should be abolished.

Virgin Media: remediation measures published

Government amendments to the Pension Schemes Bill included measures to address issues arising from the Virgin Media case (clauses 100-107).

Trustees will in principle be able to remediate amendments which might otherwise be void for lack of actuarial confirmation, by obtaining confirmation on a retrospective basis.

For an amendment to be remediated, the scheme actuary will need to confirm in writing that, in their opinion, "it is reasonable to conclude that [the amendment] would not have prevented the scheme from continuing to satisfy the statutory standard".

In some limited circumstances, amendments will be excluded from remediation. The exclusions may be relevant where legal proceedings as to validity are already underway, or where trustees have taken "positive action" on the basis that an amendment was void.

Where schemes have already been wound up or fallen into the PPF, amendments (save as above) will be deemed to have met the confirmation requirement, without the need for retrospective confirmation.

The proposed measures include provisions enabling actuaries to confirm on the basis of appropriate assumptions. The Financial Reporting Council has announced that it will publish guidance.

As drafted, the measures will come into force two months after the Pension Schemes Bill receives royal assent – likely to be in Q2 2026.

Regulations laid for multi-employer CDC

The Government pushed ahead with proposals to allow multi-employer collective defined contribution schemes, publishing aconsultation response and laying regulations before Parliament.

By way of reminder, CDC is a halfway house between DB and DC. Contributions are fixed, but assets are invested collectively and mortality risk is pooled. CDC schemes seek to deliver a DB-like pension, with benefits being adjusted if necessary to keep funding in balance.

The statutory regime for CDC schemes was established by the Pension Schemes Act 2021. Under the current regime, a CDC scheme must be for a single employer or a group of connected employers.

Via the regulations, a new type of CDC scheme will be permitted: a scheme for two or more unconnected employers (a UME scheme). The statutory regime will be modified for UME schemes. The modifications reflect the fact that UME schemes may be set up by commercial providers, and will need to cater for diverse employers and workforces.

All CDC schemes are subject to authorisation and supervision by The Pensions Regulator.

The regulations are to come into force on 31 July 2026, with a new version of TPR's CDC Code of Practice taking effect at the same time. Would-be UME providers will then be able to apply for authorisation.

Plans announced for retirement CDC

The Government launched a consultation on proposals to allow retirement CDC schemes – collective defined contribution arrangements which cover decumulation only .

A retirement CDC scheme would accept transfers made on behalf of retiring DC members, invest the funds received on a collective basis, and pay members a lifelong income (not guaranteed).

The providers of DC schemes might choose retirement CDC as a "pension benefit solution" for the purpose of the guided retirement measures in the Pension Schemes Bill.

Under the Government's proposals:

• Retirement CDC schemes will be permitted only as dedicated sections within authorised multi-employer CDC schemes or DC master trusts . Retirement schemes (ie sections) will themselves be subject to authorisation .
• Retirement CDC schemes will need to target pension increases at least in line with CPI . There will be flexibility as to other elements of benefit design, for example underwriting to reflect health or demographic factors, dependants' pensions and lump sum payments.
• DC members will be able to access a retirement CDC scheme only if their DC scheme has chosen the retirement scheme for guided retirement purposes, or has otherwise formally partnered with the scheme .

The Government will consult on detailed proposals for retirement CDC in mid-2026 . It plans to lay regulations in 2027, with the new regime taking effect from the start of 2028.

A roadmap in the consultation document suggests that, for master trusts, guided retirement will apply as from late 2027, rather than April 2027 as originally proposed.

Mandatory verification for trustee directors

Companies House announced that verification for company directors (and other "persons with significant control") would become mandatory with effect from 18 November 2025.

New directors will be required to verify their identity on appointment . Existing directors will need to verify when the relevant company next submits an annual confirmation statement .

Court determines construction of statutory reference

The High Court allowed an appeal against a determination of The Pensions Ombudsman about a member's "bridging pension".

The member left pensionable service in 2006 and retired in 2018, when she reached 60 . Under the scheme's trust deed and rules (TD&R), adopted in 2001, a pension supplement was payable until the member reached "State pension age" . The TD&R said that that term:

Under the Pensions Act 1995 as originally enacted, the member's SPA was 65 (by SPA we mean actual State pension age – payable age for the purpose of the State scheme) . However, the Pensions Act 2011 amended the 1995 Act, such that the member's SPA rose to 66.

The question was whether "State pension age" for the purpose of the TD&R was static (ie was based on the 1995 Act in its original form) or dynamic (ie was based on the 1995 Act as amended from time to time).

The Pensions Ombudsman determined that "State pension age" was dynamic.

The High Court disagreed . The person drafting the TD&R had referred to "the rules in ... Schedule 4 to the Pensions Act 1995" as a convenient shorthand, ie to avoid having to set out those rules in full . The TD&R wording did not suggest that reference was intended to be dynamic.

Accordingly, the proper construction was the static one . The member's "State pension age" for the purpose of the pension supplement was 65, even though her actual State pension age had increased to 66.

Court blesses winding-up proposals

The High Court approved steps which trustees proposed to take in connection with the winding-up of a DB scheme.

The scheme was sponsored by the Coca Cola group and had 780 pensioner and deferred pensioner members, plus a handful of active members. Most benefits had been bought in via a "captive" arrangement; the buy-in policy was issued by AXA, but the relevant liabilities were reinsured with an insurer in the Coca Cola group, RLR. In addition to the buy-in policy, the trustees held assets, essentially surplus, of £46m.

Coca Cola had power to wind up the scheme, but:

• winding-up would terminate the captive arrangement and RLR would then have to make a termination payment to the trustees;
• under current market conditions, the termination payment would be much higher than the cost of buying out the relevant benefits, meaning that the scheme's surplus would increase from £46m to perhaps £128m; and
• the trustees had power to use surplus to augment benefits on winding-up.

In the circumstances, Coca Cola was unwilling to wind up the scheme. That meant that the trustees were unable to use the existing surplus to augment benefits.

To break the logjam, Coca Cola and the trustees decided in principle to amend the captive arrangement so that the termination payment would match the cost of buying out benefits. Coca Cola would then wind up the scheme.

The trustees decided in principle that, on winding-up, they would use the surplus to augment all members' benefits proportionately. The expected uplift for each member was about 27%.

The trustees sought the Court's approval for their in-principle decisions, as regards both the termination payment and the use of surplus.

While emphasising that its role was not to consider the merits of the decisions, the Court gave its approval. The trustees had taken account of all relevant considerations and had ignored the irrelevant. And the decisions were ones which reasonable trustees could properly have reached.

TPO rulings in transfer delay cases

The Pensions Ombudsman issued a series of determinations in cases where pension transfers had been delayed. Several of the cases date back to 2020-22, when transfer values were volatile and administrators were affected by the covid-19 pandemic.

General principles espoused by the Ombudsman include the following:

• Although trustees are not obliged to accept transfers-in, where they choose to do so, they owe a duty of care to would-be transferees.
• An administrator's failure to respond within timescales specified in a service level agreement does not, in itself, amount to maladministration.
• There were significant challenges for the pensions industry in the aftermath of the pandemic. Schemes were advised to prioritise critical tasks such as processing retirements and bereavements. Other tasks, such as transfer requests, might therefore have taken longer than normal.
• Where a breach of duty could be shown, the appropriate remedy, depending on the circumstances, might include compensation for investment returns foregone, or adjustment of the relevant transfer value.

TPO rulings in transfer regret cases

The Pensions Ombudsman issued lengthy determinations in two cases where members had lost money after transferring to scam schemes. The transfers pre-dated the launch of the current "flags" regime.

In each case, the transferring trustees had carried out basic checks and had sent members the "scorpion" leaflet. But Mr D and Mrs T argued that the relevant trustees should have done more, by way of due diligence and/or warnings.

TPO ruled that:

• The members had had statutory transfer rights. The trustees had therefore had a duty to make transfer payments on their behalf.
•  "The right to transfer to an occupational pension scheme was not dependent on the member being an "earner", as a 2016 case (Hughes v Royal London) might seem to suggest.
• The trustees had not owed a duty of care to the members as regards due diligence or warnings. Such a duty would have conflicted with the statutory duty to make the transfer payments, and would be inconsistent with established legal principles. The Supreme Court's 2023 ruling in Philipp v Barclays Bank was relevant by analogy.
• The position might have been different if the trustees had voluntarily assumed responsibility for due diligence. But trustees did not assume responsibility just because they carried out basic checks.
• TPO was not in this regard obliged to adopt the same approach as either the Financial Ombudsman Service or previous Pensions Ombudsmen.

Accordingly TPO did not uphold the members' complaints. There was no finding of maladministration on the part of the trustees.

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