HL UK Pensions Law Digest 10 July 2025

Welcome to our latest update, in which we cover:

• HMRC announce change to VAT policy
  • HMRC have announced a change to VAT policy to allow employers to recover up to 100% of VAT on pension scheme investment costs.
• FCA: consultation on targeted support for pensions and retail investment decisions
  • Consultation by the Financial Conduct Authority on pensions and retail investment decisions.
• DWP confirms review of climate change regulations; Pensions Regulator working group to be established
  • Department for Energy Security and Net Zero consultation confirms that DWP will review pension scheme climate change reporting requirements.
  • The Pensions Regulator has announced that it will establish a working group to produce a voluntary net zero transition plan template for trust-based occupational pension schemes.
• Prudential Regulation Authority warns life assurance firms on risks of solvency-triggered termination rights clauses in bulk purchase annuity transactions
  • The Prudential Regulation Authority has published a “Dear CRO” letter to life assurance firms on the potential risks related to the use of solvency-triggered termination rights clauses in bulk purchase annuity transactions.
• Pension sharing on divorce: Ombudsman determines that pension scheme administrators were not under a duty to inform ex-spouse of a statutory time limit under Scots law
  • The Pensions Ombudsman has determined that pension scheme administrators were not under a duty to inform ex-spouse of a two-month statutory time limit under Scots law.
• The Pensions Ombudsman: two determinations consider decision-making in relation to the distribution of death benefits
  • Pensions Ombudsman publishes two determinations on the distribution of lump sum death benefits.
• Data (Use and Access) Bill receives Royal Assent, but largely not yet in force
  • The Data (Use and Access) Bill has received Royal Assent, becoming the Data (Use and Access) Act 2025.
• Pensions Regulator to form Pensions Data and Digital Working Group
  • The Pensions Regulator has announced its intention to launch a Pensions Data and Digital Working Group.
• PLSA name change, strategy document and press release on the PPF administration levy
  • PLSA becomes Pensions UK; lobbies for abolition of the PPF administration levy.
• New appointments: the Pensions Regulator and the Pensions Ombudsman
  • The Pensions Regulator and the Pensions Ombudsman announce new Chairs.

HMRC announce change to VAT policy

HMRC have announced that they will now allow employers of defined benefit pension schemes to recover up to 100% of VAT on pension scheme investment costs, if particular structures are adopted. Please see our more detailed briefing note for more information on the change and the next steps for employers and trustees.

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FCA: consultation on targeted support for pensions and retail investment decisions

The Financial Conduct Authority has published a consultation (CP25/17) on proposals for a new regulated regime of “targeted support” which would enable authorised firms to provide more support to “consumers” making decisions about their pensions and investments. The consultation suggests that firms will be able to choose whether to charge for the support. The proposals are largely based on their previous December 2024 consultation.

Under the proposals, firms would define groups of consumers with similar circumstances and characteristics (referred to as “consumer segments”) and provide ready-made suggestions for each consumer segment. The measures are part of the Government’s workplace pensions roadmap and aim to close the “advice gap” between consumers’ perceived desire for help and the limited support which is available to them at present.

Although the consultation will chiefly be of concern to pension and investment firms, including fund and wealth managers, platforms and SIPP operators, the FCA (and the Pensions Regulator) have expressed an interest in receiving feedback from pension scheme trustees. In particular, the consultation notes the provisions in the Pension Schemes Bill which will require trustees of occupational pension schemes to make decumulation options available to members and provide a default option.

The FCA recognises that support which relates to in-scheme occupational pension scheme investments will generally not involve trustees carrying out regulated activities (without being authorised or exempt). However, the FCA is seeking feedback from trustees on how they may want to provide a “version” of targeted support that applies solely to in-scheme benefits, including whether this would be done under the occupational pension scheme itself or whether trustees would prefer to partner with a third party FCA-authorised firm to deliver the support to members.

More broadly, the FCA would like to understand the support that trustees would like to give to members and whether a concern about undertaking a regulated activity/financial promotion is an obstacle to trustees delivering this support. The FCA indicates that it is willing to consider providing further clarity to trustees on this point.

The FCA intends to amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to facilitate the new regime. Draft amendment regulations will be published on 15 July 2025. These will create a new regulated activity of targeted support.

The consultation closes on 29 August 2025. The FCA aim to publish final rules by the end of 2025.

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DWP confirms review of climate change regulations; Pensions Regulator working group to be established

On 25 June 2025, the Department for Energy Security and Net Zero (DESNZ) published a consultation on climate-related transitional plan requirements. At present, net zero transition plans are not mandatory for occupational pension schemes.

The DESNZ consultation asks pension funds for their views on how the new transition plan requirements should integrate with the existing climate-related reporting requirements for larger pension schemes, and also about the extent to (and purposes for) which schemes already produce transitional plans.

This consultation also confirms that the Department for Work and Pensions (DWP) will conduct a review of the Occupational Pension Schemes (Climate Change, Governance and Reporting) Regulations 2021. The DWP will use the review to consider the impact of the current climate disclosure regime and potential next steps on climate change-related reports.

The consultation closes on 17 September 2025.

The consultation notes that the DWP has asked the Pensions Regulator (TPR) to assess the practicalities of transition plans for pension schemes.

On 7 July, the TPR confirmed that it will set up a transition plan working group with industry stakeholders to develop and test a voluntary net zero transition plan template for trust-based occupational pension schemes. Membership of the group is expected to include trustees, advisers and representatives of professional bodies. The stated aim of the template is to help schemes manage the risks associated with transitioning the UK economy to net zero, such as a reduction in the value of fossil fuel investments and market volatility. TPR also notes that transition plans can help trustees to capitalise on investment opportunities and promote sustainable investment.

TPR will present the findings of its industry working group to the DWP later this year.

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Prudential Regulation Authority warns life assurance firms on risks of solvency-triggered termination rights clauses in bulk purchase annuity transactions

The Prudential Regulation Authority (PRA) has published a letter to Chief Risk Officers on the potential risks in relation to the use by UK life assurers of solvency-triggered termination rights clauses (STTRCs) in bulk purchase annuity transactions. The PRA states that these risks for the bulk annuity providers include impacts on the composition of firms’ remaining asset portfolios, their liquidity positions and the management of their matching adjustment portfolios; and the operational challenges if these clauses are triggered in a stress situation. The potential risks are set out in detail in an annex to the letter.

The PRA concludes that most firms need to do more to demonstrate that they have adequately considered the full range of risks involved (for example, by setting appropriate exposure limits and planning for operational issues which might arise). The PRA urges firms to consider the risks and take any appropriate remedial actions. The PRA also states that, as part of its regular supervision, it will engage with relevant firms on a case-by-case basis to understand how they intend to respond. This could make STTRCs more difficult for trustees to secure.

The PRA will undertake a follow-up review in 2026.

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Pension sharing on divorce: Ombudsman determines that pension scheme administrators were not under a duty to inform ex-spouse of a statutory time limit under Scots law

In Ms Y (CAS-87387-G9Y9) the Pensions Ombudsman (TPO) concluded that a scheme administrator was not under a legal obligation to inform an ex-spouse of a two-month statutory time limit under Scots Law. TPO determined that the responsibility to inform the ex-spouse of the time limit fell to the ex-spouse’s solicitor.

In this case, the divorcing couple agreed to implement the pension sharing arrangement via a “qualifying agreement” – one of the pension sharing mechanisms under Scots law. Scots law relating to pension sharing on divorce (which is different to English law in a number of respects), requires that certain prescribed information must be given to the person responsible for the arrangement within two months of the relevant date (in this case, the date of the extract of the divorce decree). In broad terms, the prescribed information is the basic information necessary to implement the pension sharing agreement (names, national insurance numbers, etc). At various points in the process, the administrator wrote to the ex-spouse to chase for outstanding information but failed to mention the statutory two-month deadline.

After the deadline was breached, the administrator advised the ex-spouse that it could not implement the pension sharing arrangement because of the delay and suggested that she apply to court for an extension. The ex-spouse did this successfully, but then sought to recover her legal fees from the administrator. TPO rejected this claim, on the grounds that there was no provision in the governing regulations which required the administrator to notify her of the two-month deadline.

However, TPO did find that there had been maladministration and awarded the complainant £500 for non-financial injustice. In particular, it appeared that the administrator failed to identify that the pension sharing arrangement was governed by Scots law, and therefore failed to amend their template letters. TPO noted that the administrator is a “large organisation” which “should have had appropriate procedures and processes in place to deal with pension sharing on divorce, including those cases falling under Scots law”.

Whilst clarifying that the administrator was not under any obligation to notify the ex-spouse of the statutory deadline, this case highlights the need for administrators to recognise cases governed by Scots law and to have processes in place to deal with them.

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The Pensions Ombudsman: two determinations consider decision-making in relation to the distribution of death benefits

The Pensions Ombudsman (TPO) has published two unrelated determinations on the same topic: the decision-making process in relation to the distribution of lump sum death benefits.

The determination in Mr T (CAS-64304-R5R1) confirmed that a potential beneficiary’s inheritance from a deceased member could be considered as a relevant factor when deciding on the distribution of death benefits (in this case, the entire value of a SIPP).

TPO upheld a decision to pay the lump sum to beneficiaries other than the deceased member’s estranged civil partner (Mr T). One of the reasons given by the decision-maker for its decision to overlook Mr T was that Mr T had inherited the deceased member’s estate through the intestacy rules, and was therefore “adequately provided for” as a result of the member’s death. TPO commented that the decision-maker had conducted a “very thorough and proper investigation” into the deceased member’s circumstances and stated that the fact that Mr T was the sole beneficiary of the member’s estate was a relevant factor for the decision-maker to consider in this case.

However, it is worth noting the fact that Mr T and the member were apparently estranged and in the process of dissolving their civil partnership; and also that the member appears to have made an unsuccessful attempt to make a valid will (disinheriting Mr T) in the week before he died.

In the second determination, TPO concluded that the trustees failed to categorise additional potential beneficiaries as “relatives” within the meaning of the scheme rules.

This determination highlights the importance of correctly identifying the basis upon which individuals are potential beneficiaries. Different criteria will usually apply to different categories of potential beneficiary (for example, as in this case, the conditions which must be met in order to be a “relative” under the scheme rules may be different to those which apply to individuals who qualify as “dependants”).

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Data (Use and Access) Bill receives Royal Assent, but largely not yet in force

The Data (Use and Access) Bill has received Royal Assent. Its provisions will come into force gradually, typically as and when regulations are made under the Act.

However, a limited number of provisions have come into effect. One such measure is the requirement for searches in response to a subject access request to be undertaken only to the extent that they are “reasonable and proportionate”.

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Pensions Regulator to form Pensions Data and Digital Working Group

The Pensions Regulator (TPR) has announced its plan to launch a cross-sector Pensions Data and Digital Working Group. In a blog post, TPR’s Executive Director of Digital Data and Technology, Paul Neville, stated that the working group, which will launch in the Autumn, will collaborate on open standards for data, the enhancement of data sharing and digital integration.

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PLSA name change, strategy document and press release on the PPF administration levy

The Pensions and Lifetime Savings Association (PLSA) will now be known as Pensions UK.

On 2 July, Pensions UK published its new strategy document, a report: “2030 Ready”. This summarises Pensions UK’s views on the outlook for pension scheme members and the pensions market more generally.

On 3 July, Pensions UK issued a press release calling for the abolition of the PPF administration levy, which is now being rebilled to eligible schemes following a two-year hiatus.

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New appointments: the Pensions Regulator and the Pensions Ombudsman

The Department for Work and Pensions has announced the appointment of Kirstin Baker as the new Interim Chair of the Pensions Regulator (TPR), for a period of up to nine months, effective from 1 August 2025.

Kirstin is currently the Senior Independent member of the TPR Board. She was appointed a Panel Inquiry Chair and Panel Member Non-Executive Director of the Competition and Markets Authority (CMA) Board on 1 September 2018 and is also a member of the Audit and Risk Committee. She stepped down from the CMA Board in March 2024 but remains a Panel Inquiry Chair.

Kirstin has had a long career in the civil service and was most recently HM Treasury’s Finance and Commercial Director. Earlier in her career, she was part of the senior team leading the Treasury’s response to the banking crisis and was awarded a CBE for this work.

Deborah Evans has been confirmed as the new Chair of the Pensions Ombudsman, effective from 1 July. Deborah is currently a non-executive director and Chair of the Compliance Committee at the Property Ombudsman and is also Director and Chief Executive of Lawyers in Local Government.

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Authored by Jill Clucas and Susanne Wilkins.