Pension Schemes Bill 2025

That Bill covers a wide range of changes to both defined benefit (DB) and defined contribution (DC) pension schemes and to contract-based personal pension schemes as well as occupational pension schemes. Most of the Bill consists of a framework with powers for the Government to issue detailed regulations. The final version of the Bill is expected to receive Royal Assent in 2026. The changes relating to DB schemes are expected to come into force mostly in 2027. The changes relating to DC schemes are due to come into force between 2027 and 2030.

2. Refunds of DB Surplus

Trustees of DB schemes are to be given a new statutory power to modify their scheme rules by resolution to give the trustees power, or greater power, to refund scheme surplus to sponsoring employers whilst the scheme is ongoing, before the scheme is wound up. This change does not apply to the making of surplus refunds to sponsoring employers upon a winding up of the scheme, which will continue to be governed by the scheme rules. This change will allow trustees to introduce a power to refund surplus to the employers whilst the scheme is ongoing, where there is no such power currently, and to remove or relax any restrictions on such surplus refunds. Further, the Bill is to remove the current requirement for a trustees' resolution under section 251 of the Pensions Act 2004 to have been in place by 5 April 2016 before there can be any refund of surplus to the employers before the scheme is wound up. It will no longer be necessary to track down such resolutions before making a surplus refund whilst the scheme is ongoing.

The Bill removes the current procedural requirements under section 37 of the Pensions Act 1995 before there can be a surplus refund to the employers from an ongoing scheme. Those requirements are to be replaced by future regulations expected in 2026/7. There is an opportunity here to simplify some of the existing complexity of the process. This change is to come into force at the end of 2027.

The purpose of this change would seem to be to encourage DB schemes to run on and to release surplus to employers. However, it may be questioned what practical difference this change will make for most schemes. The trustees are to have the sole discretion to decide whether to modify the scheme rules to introduce a power to make surplus refunds to employers and the discretion whether to exercise that power. The Bill is to remove the specific statutory duty on trustees only to make a surplus refund to the employers if this in the interests of the scheme members, but the trustees will remain subject in exercising their discretions regarding surplus refunds to their duty in trust law to have regard to the interests of the scheme members and other beneficiaries and of the sponsoring employers.

3. Virgin Media/ Actuarial Confirmations under Section 37 of the Pension Schemes Act 1993

For schemes which were contracted-out on a reference scheme test (DB) basis between 6 April 1997 and 5 April 2016, the amount (if any) of scheme surplus may not be known because the legal effectiveness of all or any of the amending deeds entered into between those dates may not be certain. This arises because, as held in the Virgin Media case, if no written actuarial confirmation was given in relation to an amending deed for such a scheme within that period that the reference scheme test would continue to be met following the amendment, the relevant scheme rule amendment will have no legal effect. Section 37 and the Virgin Media case require the written actuarial confirmation to have been given before the relevant deed of amendment was entered into in order for that deed to be legally effective. The Government announced on 5 June 2025 that the Government will introduce legislation to allow retrospective written actuarial confirmation to be obtained that the scheme continued to meet the reference scheme test following historic benefit changes, which will confirm the legal effectiveness of the relevant scheme rule amendment.

This change seems likely to resolve the Virgin Media issue, subject to seeing the detail in legislation. No reference is made to this change in the current version of the Bill. It is expected that this change will be included in this Bill. Detailed regulations may also be required regarding this change. This would mean that this change would not be likely to come into force and assist schemes in this respect until 2026/7. There will also be details to address, such as how to ratify changes made to schemes which no longer exist such as legacy pre-merger schemes.

What the announcement does do is give the pensions industry more confidence that legislation will allow for historic rule amendments to be validated. This should allay the concerns of auditors of scheme accounts and sponsoring employer accounts that pension scheme liabilities may be mis-reported if historic deeds have question marks hanging over them.

4. DB Superfunds

Much of the Pension Schemes Bill 2025 sets out a new, permanent regulatory framework for DB superfunds, which for some schemes which have a weaker employer covenant and which cannot foreseeably afford to buy out in the near future provides an alternative route to securing DB scheme benefits and ultimately buying them out. The Bill here consists mainly of regulation making powers. This new regime is due to come into force in 2027.

5. Recovering Debts/Overpayments from Scheme Members

The Bill contains amendments to forfeiture legislation providing for the Pensions Ombudsman to be a competent court for the purposes of that legislation. This should make it easier for pension trustees to recover debts and overpayments from scheme members where a favourable determination on the matter has been obtained from the Pensions Ombudsman.

6. Trustees' Duty to make Decumulation Options Available to Scheme Members/ "Guided Retirement"

The Bill would introduce a new obligation on the trustees of DC pension schemes to make available one or more default pension benefit solutions, to provide regular income from the scheme to scheme members, when members are about to draw their scheme benefits. This is to include trustees identifying one such benefit option as suitable for each scheme member (the Government refer to this as "Guided Retirement") . DC pension trustees must also adopt a pension benefits strategy, which they are to provide on request to the Pensions Regulator and to scheme members. Further detail on this is to follow in regulations. This change is due to come into force in 2027.

7. New DC Value for Money Requirements

The Pension Schemes Bill sets out regulation making powers to impose more onerous obligations on the trustees of DC pension schemes to assess the value for money for scheme members of their schemes. The Pensions Regulator is to be given power to require a DC scheme which is not delivering value for money for members to wind up and to transfer the DC pension rights in that scheme without the members' consent to another DC scheme which is reasonably expected to result in the generality of scheme members receiving improved long-term value for money. This change is due to come into force in 2028 and seems designed to drive greater consolidation of DC pension schemes.

8. Bulk Transfers without Member Consent from Personal Pension Schemes

The Bill is to introduce a new overriding statutory power for providers of personal pension schemes to transfer pension rights in bulk from their schemes without member consent to an authorised DC master trust or other personal pension scheme, where the provider is reasonably satisfied that that transfer is in the best interests of the scheme members. This is due to come into force in 2028. This change also seems designed to bring about greater DC consolidation.

9. DC Megatrusts and LGPS Asset Pooling/ Reserve Power to Require UK/"Productive" Investment

In line with this, the Bill sets out a framework under which authorised DC master trusts and group personal pension schemes may only be used to satisfy automatic enrolment obligations where the main scale default arrangement of the scheme exceeds £25 billion in value. This is to be brought fully into effect in 2030, after a transition pathway. The express purpose of this new requirement is to consolidate authorised DC master trusts and group personal pension schemes into a much smaller number of DC megatrusts, which will be of sufficient size to be able to have a significant investment in "productive" assets such as private equity, private debt, venture capital and infrastructure, including in the UK

For similar reasons, the Bill also provides for asset pooling by Local Government Pension Scheme funds, in order to improve scheme governance, but also to facilitate greater investment in such "productive" assets. The LGPS asset pooling provisions are to come into force when the final version of the Bill receives Royal Assent in 2026.

The section of the Bill relating to DC megatrusts includes a reserve power to require that authorised DC master trusts and group personal pension schemes will only be approved as automatic enrolment schemes if they invest at least a minimum proportion of scheme funds in such "productive" assets and in UK "productive" assets. This reserve power would seem only to be aimed at DC, and not DB, schemes. The express purpose of this reserve power is to mandate investment in "productive" assets if the affected schemes fail to do so on a voluntary basis.

10. Consolidation of Small Dormant DC Pension Pots

Finally, the Bill sets out regulation making powers for the consolidation of DC pension pots of £1,000 or less in value, where no contributions have been paid into such pots in the last 12 months. This is to be achieved by giving the trustees of DC schemes a duty to transfer out such small dormant DC pension pots without member consent to an authorised DC master trust or to an FCA-approved personal pension scheme. The purpose of this change is to reduce the administrative burden on smaller DC pension schemes of retaining such small dormant DC pension pots. This change is to come into force in 2030.

Please contact your usual Fieldfisher contact if you require any advice on these matters.