HL UK Pensions Law Digest 13 November 2025

Salary sacrifice of pension contributions: Society of Pension Professionals (SPP) paper

• The SPP explores the likely outcomes if the Chancellor decides to remove salary sacrifice for employee contributions;

Updates from the Work and Pensions Committee (WPC)

• An inquiry by the WPC into pre-pension poverty and further consideration of discretionary increases and use of surplus;

Economic Crime and Corporate Transparency Act 2023 (ECCTA): identity verification requirements coming into force on 18 November

• Certain provisions of ECCTA, including those relating to identity verification, are set to come into force on 18 November 2025;

Pension Ombudsman (TPO) blog highlights the achievements of the Operating Model Review programme

• TPO has published a blog focussing on the progress of the Operating Model Review programme, in terms of improved efficiency and limiting demand; and noting TPO's priorities going forward;

The Pensions Administration Standards Association (PASA) responds to the Information Commissioner's Office (ICO's) consultation on data protection complaints

• PASA has published its response to the ICO's consultation on data protection complaints, with an emphasis on a "joined-up" approach;

The Financial Reporting Council (FRC) consults on the statutory money purchase illustrations actuarial standard

• Following an annual review, the FRC is consulting on its proposal to leave the assumptions used in the statutory money purchase illustrations actuarial standard unchanged;

The Pensions Administration Standards Association (PASA) publishes new industry guidance on the use of Artificial Intelligence (AI) in pensions administration

• PASA has published practical guidance for pension scheme administrators and trustees on using AI in pensions administration.

Salary Sacrifice: SPP Paper

The Society of Pension Professionals (SPP) has issued a paper exploring the impact of reducing or removing salary sacrifice arrangements for pension contributions.

The paper follows research published by HMRC in May 2025 into employer attitudes to salary sacrifice and pension contributions, which has led to speculation that removing salary sacrifice may be in the Chancellor’s sights for the Autumn Statement on 26 November. HMRC’s research considered different means of reducing the cost of salary sacrifice, including by removing the NIC exemption on salary sacrificed above a £2,000 threshold.

Points to note from the SPP paper include the following:

• A reminder that National Insurance contributions (NICs) are payable on employee pension contributions but not on employer contributions. A salary sacrifice arrangement in which an employee accepts a lower salary in return for higher employer pension contributions results in NICs savings for both the employer and employee;
• Around one-third of private sector employees and almost 10% of public sector workers use salary sacrifice arrangements;
• For 2023/24, the total cost of NIC relief on pension contributions was £24bn. Salary sacrifice accounted for £4.1bn of this amount;
• Abolishing salary sacrifice would result in lower take home pay for affected employees, or reduced pension savings. As employees pay NICs of 8% on salary up to £50,284 per year and 2% on salary above this amount, the impact of removing salary sacrifice would be greater for lower paid individuals; and
• If salary sacrifice is removed, employers are likely to adopt alternative benefit packages to maximise tax efficiency, retain staff and reduce costs. This might include offering a lower starting salary to new recruits, but with a non-contributory pension scheme.

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Updates from the House of Commons Work and Pensions Committee (WPC) 

Inquiry: pre-pension income gap and rise in State Pension age

State Pension age (SPA) will increase from 66 to 67, phased in over two years starting in April 2026. The WPC has launched an inquiry into the likely impact of the increase on individuals in the pre-pension years, who are more likely to leave work for health reasons or to care for partners, but who are not yet eligible for State Pension. The inquiry notes that the increase in SPA from 65 to 66 led to 100,000 more 65 year olds being in absolute poverty.

The inquiry follows a report on pensioner poverty, published by the WPC in July 2025. The government’s response has recently been published. The WPC notes that the government has not committed to adopting an aging society strategy, as was recommended by the WPC’s report.

Discretionary payments and member representation in defined benefit (DB) pension schemes

The WPC has published a letter it sent to the Minister for Pensions on 30 October. The letter continues the dialogue concerning discretionary increases for DB pensions and expresses doubt that the surplus extraction provisions in the Pension Schemes Bill will result in increased benefits in practice. (The new provisions only enable trustees to pay surplus to the employer; they do not give trustees a unilateral power to use surplus to increase member benefits. Except where the trustees have a unilateral decision-making power over surplus under the scheme rules (which is unusual), any benefit increases will still need employer consent.) The WPC asks the Minister to explain:

• What discussions have been held with HMRC concerning changing the tax provisions to allow one-off payments to members;
• What consideration has been given to the proposal from some campaigners that an independent arbiter should be appointed where an employer and trustees do not agree on the distribution of surplus; and
• If the DWP is not considering an independent arbiter, what alternative plans it has to monitor the distribution of surplus and to act if trustees’ recommendations are not followed.

The WPC notes that the Bill has been amended to make clear that the new surplus extraction power will not apply to schemes in winding-up. It has asked the Minister what information the DWP has about how surpluses are distributed between employers and members on winding-up, and whether decisions are made by employers, trustees or both.

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Economic Crime and Corporate Transparency Act 2023 (ECCTA): identity verification requirements coming into force on 18 November 

Certain provisions of ECCTA are set to come into force on 18 November 2025.

From 18 November 2025, individuals will be prohibited from acting as a director without having verified their identity, subject to transitional provisions of up to 12 months. Failure to comply with the verification obligations is a criminal offence (punishable by a fine), committed by the individual director, the company, and the company’s officers.

More information on the requirements can be found in our August briefing and in our podcast.

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Pensions Ombudsman (TPO) blog highlights the achievements of the Operating Model Review programme 

On 20 October 2025, the Pensions Ombudsman, Dominic Harris, published a blog in which he reflected on the achievements of the Operating Model Review programme and considered TPO's priorities going forward.

TPO notes that case closures in the first six months of 2025/26 are up 14% on the same period last year.

The 6% increase in new applications during the same period is lower than the previous year's increase, suggesting that TPO's approach to limiting demand (e.g. through using a single "lead case" where there are multiple complaints about the same scheme) is working.

TPO will continue to encourage the early settlement of complaints by, for example, working with the industry to raise the profile of good dispute resolution processes.

TPO will also continue to implement workstreams to drive further efficiencies; for example, it intends to expand the use of expedited determinations throughout the organisation and make the large cohort of complex cases a "key focus" for 2025/26. More information about TPO's priorities for 2025/26 can be found in TPO's June update.

TPO acknowledged that it will take time to clear the backlog of complaints, but is confident that there will be a "material reduction" in the backlog and customer waiting times over the next few years.

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The Pensions Administration Standards Association (PASA) responds to the Information Commissioner's Office's (ICO's) consultation on data protection complaints 

PASA has published a short response to the ICO's consultation on draft guidance for organisations handling data protection complaints. The consultation has now closed.

PASA's focus is on achieving "practical, joined-up guidance, which recognises the complex regulatory environment in which pension schemes operate". With this aim in mind, PASA's response notes that it would be helpful if the ICO could consider and, where appropriate provide, additional guidance on the following areas:

• Integrated complaint handling across regimes; for example, where one element relates to data protection and another to occupational pensions. PASA requests clarification specifically on whether complaints can be addressed holistically under the pension complaints process.
• Expectations around complaints procedures. The PASA response asks the ICO to clarify whether pension schemes are expected to maintain two distinct procedures (one for pensions/scheme matters and one for data protection complaints).
• Post investigation guidance. PASA asks for further detail on post-investigation expectations; specifically, the timeframe for escalating the complaint to the ICO and the recommended retention periods for complaint records and responses held by the data controller.
• Handling Subject Access Requests (SARs) linked to complaints. PASA notes that SARs and complaints often arise concurrently, sometimes (in the case of a SAR) with "vexatious intent". PASA submits that it would be beneficial for the ICO to offer guidance on managing SARs in these contexts, including what constitutes a "reasonable and proportionate search".

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The Financial Reporting Council (FRC) consults on the statutory money purchase illustration actuarial standards 

On 30 October, the FRC launched a consultation on Actuarial Standard Technical Memorandum 1: Statutory Money Purchase Illustrations (“AS TM1”), following its annual review of market conditions.

Since 6 April 2003, money purchase pension arrangements have been required to provide members with Statutory Money Purchase Illustrations (“SMPIs”). In accordance with the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, AS TM1 provides guidance for the preparation of SMPIs.

The FRC does not propose any amendments to the assumptions in the standard, but does propose a minor change to the wording relating to fund volatility calculation dates, in order to clarify the policy intention.

The consultation runs until 1 December 2025.

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The Pensions Administration Standards Association (PASA) publishes new industry guidance on the use of AI in pensions administration 

On 28 October, PASA published new industry guidance on the use of Artificial Intelligence (AI) in pensions administration.

The guidance follows the Financial Conduct Authority's April 2024 AI Update and the Pension Regulator's October 2024 Digital, Data and Technology (DDaT) Strategy.

The guidance notes the remarkable potential of AI to enhance administration functions, but advises organisations to proceed with "responsibility and caution". It emphasises the crucial importance of data quality, as "data is the bedrock of AI".

Whilst noting the opportunities presented by AI (e.g. improving operational efficiency, personalising member interaction, etc.), PASA also highlights important risk management considerations, and their potential mitigation, in a series of practical action points for trustees and administrators, including:

• The need to comprehensively understand the capabilities and limitations of AI. Trustees are advised to ask their administrator to set out their key considerations in assessing the AI technologies they are deploying, including both capabilities and limitations.
• The need to protect saver data. The guidance sets out some key steps for administrators to take, including implementing robust data encryption and access controls. Trustees are advised to ensure that they understand how data is being stored and used, and that adequate data security is in place.
• The need to mitigate data bias and discrimination, by for example, using diverse datasets, monitoring for signs of bias and establishing procedures for member feedback.
• Challenges to transparency and accountability, due to the opaque nature of AI decision-making processes. In addition to some practical tips for administrators, the guidance recommends that trustees ensure they understand how AI is making decisions, that decision-making is reviewed and that material decisions continue to be made by trustees with advice and documentation. Member warnings may also be appropriate.
• The need to maintain human review and oversight. The guidance suggests that administrators should, amongst other things, define clear roles and responsibilities, ensuring human review and oversight in AI driven processes; and also define an AI lead, with the skills and capabilities to keep up to date with AI technology. Administrators are urged to remember the saver experience and keep access to a human-led contact route. PASA advises trustees to understand saver interactions with AI and human support, and to seek out training and support.
• The danger of overlooking scheme-specific requirements and complexities. On the administration side, PASA suggests that this can be mitigated by ensuring that AI tools can be used effectively within the specific context and complexities of different schemes; and through the provision of conduct workshops and collaboration sessions. Trustees are advised to ensure that they understand how their scheme specifics are being applied and allowed for.

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Authored by Jill Clucas and Susanne Wilkins.