Key Takeaways
- • The UK Pension Schemes Bill was published on 5 June 2025, which the government describes as a "game changer" aimed at raising members' pension pots and unlocking a £50 billion investment into the UK economy.
- • The Bill introduces a Value for Money (VFM) framework for DC schemes requiring public ratings of "fully delivering," "intermediate," or "not delivering," with TPR empowered to substitute ratings, appoint trustees, force member transfers, or wind up underperforming schemes.
- • For DB schemes, trustees gain powers to release trapped surplus, with the funding threshold for surplus payments cut from buy-out to low dependency funding basis; these changes are expected to take effect in 2027.
- • Automatic consolidation of deferred DC pots of £1,000 or less (dormant at least 12 months) is planned, with consolidation schemes requiring TPR or FCA authorisation; the system is expected in 2030.
- • Other provisions include DC megafunds through scale requirements, a DB superfunds regime, and reforms to Local Government Pension Scheme investment management in England and Wales.
Summary
The UK government has published the Pension Schemes Bill, which it describes as a "game changer" for workplace pensions. According to the accompanying publisher analysis, the Bill is intended to increase members' pension pots and channel £50 billion into the UK economy, and it is expected to affect more than 15 million people saving in private sector pension schemes. The Bill was published on 5 June 2025 alongside a government roadmap setting out indicative implementation timing.
For defined contribution schemes, the Bill introduces a Value for Money framework requiring schemes to disclose, assess and publicly report on metrics expected to cover investment performance, costs and charges, and quality of services. Schemes will assign themselves a rating, and those rated "not delivering" must prepare action plans, notify TPR, and close to new employers. The Pensions Regulator will be able to substitute ratings, appoint trustees, require member transfers, or order winding up. The first disclosures are expected in 2028. The Bill also provides for automatic consolidation of small deferred pots of £1,000 or less, subject to authorisation by TPR or the FCA, with implementation expected in 2030. Trustees will additionally be required to offer default retirement solutions, with requirements expected from 2027 for authorised master trusts and 2028 for other schemes.
For defined benefit schemes, trustees will be able to modify rules to create or relax powers to make surplus payments to employers. Regulations setting detailed modifications have not yet been published, though the government has confirmed the funding threshold will fall from full buy-out funding to full low dependency funding. These changes are expected to take effect in 2027. Advisers expect significant lobbying and possible policy shifts over the coming months as the Bill progresses.
The Bill also covers DC megafunds, a supervision regime for DB superfunds, Pensions Ombudsman enforcement powers in overpayment cases, removal of the PPF levy floor of £100 million, and reforms to Local Government Pension Scheme investment management. Law firm Mayer Brown advises that trustees and employers of both DC and DB schemes should monitor the Bill's progress and begin factoring the changes into long-term scheme planning.
For defined contribution schemes, the Bill introduces a Value for Money framework requiring schemes to disclose, assess and publicly report on metrics expected to cover investment performance, costs and charges, and quality of services. Schemes will assign themselves a rating, and those rated "not delivering" must prepare action plans, notify TPR, and close to new employers. The Pensions Regulator will be able to substitute ratings, appoint trustees, require member transfers, or order winding up. The first disclosures are expected in 2028. The Bill also provides for automatic consolidation of small deferred pots of £1,000 or less, subject to authorisation by TPR or the FCA, with implementation expected in 2030. Trustees will additionally be required to offer default retirement solutions, with requirements expected from 2027 for authorised master trusts and 2028 for other schemes.
For defined benefit schemes, trustees will be able to modify rules to create or relax powers to make surplus payments to employers. Regulations setting detailed modifications have not yet been published, though the government has confirmed the funding threshold will fall from full buy-out funding to full low dependency funding. These changes are expected to take effect in 2027. Advisers expect significant lobbying and possible policy shifts over the coming months as the Bill progresses.
The Bill also covers DC megafunds, a supervision regime for DB superfunds, Pensions Ombudsman enforcement powers in overpayment cases, removal of the PPF levy floor of £100 million, and reforms to Local Government Pension Scheme investment management. Law firm Mayer Brown advises that trustees and employers of both DC and DB schemes should monitor the Bill's progress and begin factoring the changes into long-term scheme planning.
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