HL UK Pensions Law Digest 18 December 2025

What’s happening in Parliament?

• A quick update on the progress of pensions-related Bills through Parliament;

Department for Work and Pensions (DWP) launches consultation on the future of pensions trusteeship

• The DWP has published a consultation paper on raising the standards of pensions trusteeship;

Pensions Regulator (TPR) publishes its annual overview of the UK occupational defined benefit and hybrid scheme landscape

• TPR's annual statistics publication reports on scheme status, membership levels and assets;

Targeted support on pensions and investment

• Authorised firms may provide targeted support to individuals from April 2026;

Financial Conduct Authority (FCA): changing requirements for DC schemes

• Consultation by the FCA on rules for interactive pension modellers and on a new regime for non-advised DC transfers;

Fetter on amendment did not protect future service rights

• The High Court considers the meaning of “accrued rights or interests”;

Pensions Ombudsman (TPO): overpayments information sheet

• A factsheet to send to members in overpayment cases;

Pensions Ombudsman (TPO) rejects complaint in relation to a non-statutory transfer

• TPO concludes that the trustee was not required to carry out due diligence in respect of a member's non-statutory transfer;

Pensions Administrative Standards Association (PASA) publishes industry paper on the Data (Use and Access) Act 2025 (DUAA)

• PASA's paper highlights six key areas for pension schemes to consider in relation to the DUAA.

Bills relevant to pensions: what's happening in Parliament?

Pension Schemes Bill

• Second reading of the Bill in the House of Lords is scheduled for 18 December 2025, after which the Bill will be scrutinised by Committee in the Lords.

Finance (No 2) Bill

• The Bill had its second reading in the House of Commons on 16 December 2025.
• Clauses 63 to 68 (concerning inheritance tax on pensions) are among the provisions which will be considered by a Committee of the whole House, to be held over two subsequent (but not yet announced) days.
• The remainder of the Bill will be considered by a Public Bill Committee, whose proceedings must conclude no later than 26 February 2026.

National Insurance Contributions (Employer Pensions Contributions) Bill

• The Bill had its second reading in the House of Commons on 17 December 2025.
• The Bill will next be considered by a Committee of the whole House, although no dates have been announced.

Parliament will be in recess from 19 December 2025 to 4 January 2026.

Return to Contents.

Department for Work and Pensions launches consultation on the future of pension scheme trusteeship

On 15 December, the Department for Work and Pensions (DWP) launched a consultation: Trust-based pension schemes: Trustees and governance, building a stronger future.

The DWP views the consultation as an opportunity to "take stock" in advance of the changes set out in the Pension Schemes Bill, which will introduce new and potentially significant decision points for trustees (e.g. around surplus release, guided retirement). The DWP is aiming to identify measures that can raise the standards of trusteeship, governance and administration of trust-based workplace pension schemes, with a particular focus on the challenges created by a rapidly consolidating mass defined contribution market.

Some key points are set out below.

Good governance:

• The consultation considers the risk of conflicts of interest arising for trustees of master trusts; and separately for professional trustees.
• The consultation seeks feedback on whether there should be restrictions on the number of appointments held by individual trustees.
• It also seeks feedback on whether there should be restrictions on the appointment of sole corporate trustees, citing potential issues such as short transition periods between the existing and new trustee structures and a lack of checks and balances.

Appointment of trustees:

• Given the expected increase in market consolidation, the consultation seeks feedback on whether more safeguards are needed, noting the need for trustee bodies to have a diverse talent pool, with a wide range of skills and knowledge.
• The consultation also floats the idea of introducing a new "public trustee", appointed by the Pensions Regulator, and used when trustees need to be replaced or to administer an orphan scheme.
• The consultation is in favour of an internal (i.e. not publicly available) trustee directory, populated, for example, by harvesting information from scheme returns or through direct registration. It seeks views on the most effective way to monitor trustees without significantly increasing the administrative burden on schemes.

Skills and knowledge:

• The DWP seeks views on introducing "higher requirements" for professional trustees, in addition to the knowledge and understanding requirements which all trustees must meet, including whether these new requirements should be statutory.
• The consultation notes the industry shift away from lay trustees. It seeks feedback on identifying the important benefits or skills of lay trustees - and on how they might be replicated in larger, consolidates scheme structures.
• The DWP also seeks feedback on the accreditation of trustees more broadly, including who should meet the costs of any accreditation.

Member voices:

• The DWP asks for views on how "member voices" can be represented in the new landscape of consolidated schemes; and the consultation asks for examples of best practice in the UK and internationally.

Administration:

• The consultation notes the critical importance of high-quality pension scheme administration to building and maintaining trust in the pensions system. It further notes that there are "regulatory gaps" where neither the Pensions Regulator nor the Financial Conduct Authority has powers to act against an administrator. The DWP seeks feedback on how administration standards should be regulated (e.g. directly through the Pensions Regulator, or through setting minimum standards).

The consultation closes on 6 March 2026.

Return to Contents.

The Pensions Regulator publishes its annual overview of the UK occupational defined benefit and hybrid scheme landscape

On 16 December, the Pensions Regulator (TPR) published its annual overview of the occupational defined benefit (DB) and hybrid scheme landscape in the UK. The report contains detailed statistics on scheme status, membership levels and assets, deriving from TPR's DB and hybrid scheme returns.

The report's key findings include:

• The DB and hybrid landscape continues to shrink at a yearly rate of 3% on average. The percentage of schemes closed to future accrual (excluding those in wind-up) rose from 73% in 2024 to 74% in 2025.
• Membership in private DB and hybrid schemes has fallen by 3% since 2024, to 9,174,000. The number of schemes closed to future accrual decreased in 2025 for the first time (from 5,656,000 in 2024 to 5,413,000 in 2025) – a drop of 4%.
• The technical provisions (TPs) funding level has stayed the same at 118%. Assets and liabilities both fell by 10%. The percentage of schemes in TPs surplus is 82% in 2025, compared to 80% in 2024.
• There are equal pensioner members (47% of total members) and deferred members (46% of total members) in private schemes

The report has also corrected previously reported data errors affecting membership counts in the public sector. A comparison of the original and corrected data is set out in the first part of the report.

Return to Contents.

Targeted support on pensions and investments

The government and the Financial Conduct Authority (FCA) have taken further steps to enable the provision of targeted support to individuals for whom taking financial advice may not be possible or appropriate. In a recently-issued consultation response, HM Treasury comments that this represents the “biggest reform of the financial advice and guidance landscape in more than a decade”.

Points to note include:

• Firms will require authorisation by the FCA or the Prudential Regulation Authority (PRA) to provide targeted support. Providing targeted support will be a new specified activity under the Regulated Activities Order 2001 and will be different from “advising on investments”.
• The targeted support regime will apply from early April 2026, with firms able to apply for authorisation from March 2026. The FCA has opened its Pre-Application Support Service (PASS) for firms planning to apply for permission to provide targeted support.
• Authorised firms may provide targeted support with investments and pensions, by making recommendations designed for groups of consumers with similar characteristics and circumstances.
• Alongside targeted support recommendations, consumers must also be given information about the nature and limitations of the service.
• A joint statement by the FCA and the Information Commissioner’s Office (ICO) explains how firms can comply with data protection requirements when delivering targeted support. Secondary legislation will allow workplace pension providers to send targeted support communications to members who have not opted out of direct marketing.
• The government intends to review the operation of targeted support alongside wider policy developments, including guided retirement.

Points of interest from FCA Policy Statement (PS25/22) on rules for targeted support include:

• Firms may decide whether to charge consumers for targeted support. Firms may recover the cost of providing targeted support through cross-subsidy from other business lines, subject to various safeguards, including the requirement that all consumers must receive fair value.
• Consumers will have the same cancellation rights in respect of products sold via targeted support as currently apply in relation to contracts made after a personal recommendation.
• Pensions dashboards providers (other than the MoneyHelper dashboard) will not be allowed to offer targeted support as a service after viewing dashboard information (a “post-view service”).
• If trustees of an occupational pension scheme or Master Trust provide support to members akin to targeted support solely in relation to in-scheme benefits, this will not fall within the regulated activity of providing targeted support.
• The FCA envisages targeted support working in tandem with the new guided retirement requirements under the Pension Schemes Bill. It expects to issue a discussion paper in Spring/Summer 2026 on the guided retirement framework, alongside consultation from the DWP.

For more detailed analysis relevant to authorised firms, please see this article by Hogan Lovells Financial Services team.

Return to Contents.

Financial Conduct Authority: Adapting our requirements for a changing pensions market

The Financial Conduct Authority (FCA) has issued a consultation paper (CP25/39) aimed at adapting the FCA’s requirements to meet the future needs of defined contribution (DC) members. The FCA proposes changes in two areas, explained below.

Consultation closes on 12 February 2026. The FCA intends to publish a policy statement and final Handbook text in the second half of 2026.

Interactive pension modellers

The FCA is proposing to introduce a new regime to govern interactive pension modellers (pension projections) for personal and stakeholder pension schemes.

• Under the new rules, an interactive modeller must produce an initial simulation in line with the FCA’s requirements and then allow the consumer to see different potential outcomes by selecting different options, such as changing the rate of return or contribution level.
• Modellers must allow consumers to choose between certain minimum variables and may offer other parameters, such as changing the choice of investment fund or level of risk.
• The new regime will apply only to projection tools which are interactive and directly accessible by retail consumers.

Defined contribution transfers and consolidation

The FCA proposes new requirements to apply to non-advised transfers involving DC pensions regulated by the FCA. As proposed, an “engaging firm” (an FCA-regulated pension provider arranging the consumer’s potential new pension, or a third party through which the receiving pension arrangement is distributed) would have to follow a three-step process:

• Step 1: obtain the consumer’s consent to gather information from the consumer’s potential transferring schemes;
• Step 2: request details from the transferring schemes (including details of benefits, features and core characteristics) using a standard information request; and
• Step 3: compile and present the information to the consumer, including a comparison with the proposed receiving scheme. The information must be presented separately and before the option to make a formal instruction to transfer.

Completing a full information request will not be required for DC pots below the threshold for small pot consolidation, expected to be £1,000.

The FCA recognises that that it cannot impose binding requirements on trustees of occupational DC schemes but suggests that occupational scheme trustees could choose to respond to an information request. The FCA is in discussion with the Department for Work and Pensions (DWP) about its proposals and expects the DWP to consider whether similar requirements would be beneficial for occupational schemes.

Return to Contents.

Fetter on amendment did not protect future service rights

In a recent case (3i PLC v John Decesare and Ors), the High Court held that a restriction in a scheme amendment power prohibiting changes which would diminish the “accrued rights or interests of any Member or other person in respect of benefits already provided” did not prevent a rule amendment to close the scheme to future accrual.

The Court distinguished the 2024 case of BBC v BBC Pension Trust Ltd and Anor , in which the Court of Appeal held that a prohibition on amendments which would substantially prejudice members’ “interests” prevented closure to future accrual or reduction of future service rights.

Background

In 2010, the 3i Pension Plan (the “Plan”) was closed to future accrual by a deed made between the sponsoring employer and the trustees (the “Closure Deed”). The Closure Deed retained a final salary link in respect of accrued rights up to the date of closure.

In 2023, the sponsoring employer gave notice to terminate the Pan, following which the trustees resolved to commence winding up. In May 2024, individual annuities were assigned to members.

In July 2024, the Plan had an estimated surplus of £83m. The trustees had power under the Plan rules to determine the use of surplus and decided, after consulting the members, to pay the surplus to the employer.

Before making a final decision regarding the surplus, the trustees became aware of the Court of Appeal’s decision in BBC and were concerned at the similarity with the restriction in the Plan’s amendment power. The trustees sought confirmation from the Court about the correct meaning of the amendment power and, therefore, the validity of the changes made by the Closure Deed.

The fetter

The Plan amendment power contained a prohibition (the “Fetter”) which prevented any change which would: “diminish any pension already being paid under the [Plan] or the accrued rights or interests of any Member or other person in respect of benefits already provided under the [Plan]”.

The High Court’s decision

The High Court held that the start and end point of the analysis was the natural meaning of the Fetter in its context. The Fetter’s language was unambiguous: it was concerned with preventing amendments which would diminish past service benefits.

It followed that, given the retention of a final salary link in the Closure Deed, the changes it made were a valid exercise of the amendment power.

In reaching this conclusion, the judge held that:

• In contrast to the BBC case, in the Fetter “interests” was used as part of the composite phrase “accrued rights or interests”. The term “accrued rights” was not a compound noun which operated in the Fetter independently of “interests”. Instead, the ordinary and natural meaning of the language was for “accrued” to apply to both “rights” and “interests”.
• The phrase “accrued rights or interests” was qualified by reference to “benefits already provided”. The focus was very much on what had already occurred, with no suggestion that “interests” concerned future service accrual.
• Previous caselaw admitted the possibility of “accrued interests”. The Court accepted that “interests” may have been included in the drafting of the Fetter to protect the right to be considered for any discretionary benefit in relation to benefits already accrued.
• Decisions in earlier cases concerning the meaning of fetters in amendment powers were of limited assistance, given the different language used in those cases.

Return to Contents.

Pensions Ombudsman: overpayment factsheet

The Pensions Ombudsman (TPO) has issued an information sheet on overpayments, to help members understand the key issues which may arise. The factsheet explains that schemes will usually seek to recover overpaid amounts, even though the overpayment may not have been the member’s fault.

The factsheet also sets out the defences which may be available to a member facing a claim for repayment and the types of evidence likely to be needed to support a defence.

TPO explains that it would like schemes to share the information sheet with members, preferably when informing the member of an overpayment, or if the member queries or challenges attempts to recover an overpayment.

Return to Contents.

Pensions Ombudsman rejects complain in relation to a non-statutory transfer: trustee was not required to carry out due diligence

The Deputy Pensions Ombudsman (TPO) has rejected a complaint from a former member of the BMW (UK) Operations Pension Scheme (Mr S), who argued that the trustee had failed to carry out sufficient due diligence checks before transferring his benefits, valued at around £103,000, to the Uniway Systems Retirement Benefit Scheme in 2014/15.

Mr S also argued that the trustees should not have agreed to the transfer, broadly on the basis that it was non-statutory (because, according to Mr S, he was not an "earner" under relevant legislation).

The determination follows similar cases in relation to statutory transfers and provides further comfort to trustees in relation to their due diligence obligations before the so-called "conditions for transfers" regulations came into force in 2021.

Non-statutory transfer

There was some doubt about whether Mr S's transfer had been statutory (pursuant to the Pension Schemes Act 1993) or non-statutory (made under the rules of the transferring scheme). In any event, TPO concluded that Mr S's signed transfer form was broad enough to be used in both statutory and non-statutory transfers, and constituted a valid transfer request.

However, for the purpose of her analysis, TPO found that the better view was that the transfer was non-statutory.

TPO noted that the transfer discharge forms were returned outside of the three month guarantee period. TPO interpreted this as the trustee accepting a transfer request under the rules, rather than having, in effect, waived the statutory requirement for Mr S to request a transfer within the three month window (through its conduct in accepting the transfer request and paying the transfer amount).

TPO did not find "anything inappropriate or retrospective" about the trustee having accepted the transfer request on a non-statutory basis, and confirmed that there was no obligation on the trustee to notify the member that his transfer was being made under the scheme rules.

Since the discretion to allow the transfer under the rules was exercised in his favour, TPO noted that Mr S could have no cause of action against the trustee in respect of its exercise of discretion.

Due diligence

TPO found that the trustee:

• did not owe Mr S a general duty of care to investigate or consider whether the transfer was in his interests; and
• did not owe (and did not voluntarily assume) a duty to undertake due diligence suggested by the anti-fraud action packs published by the Pensions Regulator at the time.

TPO concluded that the trustee had no duty under legislation to carry out due diligence in relation to a statutory transfer or a non-statutory transfer, apart from ensuring that the applicable requirements of legislation or of the scheme rules were met.

TPO noted that it had previously considered trustee obligations to carry out due diligence in respect of statutory transfers - and concluded that trustees did not have a duty of care to carry out the due diligence suggested by the Pension Regulator's 2013 action pack. TPO applied the same principles to Mr S's non-statutory transfer and the 2014 action pack, which was "not materially different" from the 2013 version and, most importantly, had the same status as guidance.

TPO rejected Mr S's argument that a particular legislative provision (section 99 of the Pension Schemes Act 1993, requiring trustees dealing with a statutory transfer request to do “what is needed to carry out what the member requires”) creates a duty to carry out due diligence.

TPO also considered whether the trustee had assumed a voluntary duty of care towards Mr S in respect of his transfer. In order to establish this, it would be necessary to demonstrate that:

• the trustee had voluntarily assumed responsibility for undertaking due diligence to identify risks associated with investments in the receiving scheme;
• Mr S placed reasonable reliance on the trustee undertaking that due diligence; and
• that it was reasonably foreseeable to the trustee that Mr S would rely on the trustee's due diligence.

In rejecting Mr S's arguments on these points, TPO noted that the trustee was aware that Mr S had engaged an IFA, which might suggest that it was "reasonable for [the trustee] to expect the member to be relying on [the] adviser". TPO was also of the view that sending out the "scorpion leaflet" (part of a suite of anti-fraud warning documents issued by the Pensions Regulator at the time) and/or asking a member to confirm that they had read it, would also "tend to negate any assumption of duty" in respect of the scorpion leaflet checks.

Return to Contents.

The Pensions Administrative Standards Association publishes industry paper on the Data (Use and Access) Act 2025

The Industry Policy Committee of the Pensions Administrative Standards Association (PASA) has published an industry paper on the Data (Use and Access) Act 2025 (DUAA): The Data (Use and Access) Act 2025 Unpacked: Six key areas for pension schemes.

The DUAA received Royal Assent on 19 June 2025, and the first provisions came into force on 19-20 August 2025. The DUAA introduces reforms to the UK’s data protection framework which, whilst not pensions-specific, are relevant to pension scheme governance.

The paper outlines six key areas for pension schemes:

• Automated Decision Making. The DUAA moves from a prohibition-based model to a risk-based one, opening the door for increased automation while retaining key safeguards.
• Digital Verification Services and the Trust Framework. The DUAA mandates certification of Digital Verification Services under the Digital Identity & Attributes Trust Framework. This creates an audited, standards-based route for schemes to source identity checks.
• Recognised Legitimate Interests (RLIs). This is a new lawful basis for processing personal data. Unlike the longstanding "legitimate Interests" basis, RLIs do not require a balancing test between individual impact and organisational benefit – the public interest is predetermined for each specified RLI. One RLI potentially relevant to pension schemes is "safeguarding vulnerable individuals", which will support timely and proportionate safeguarding interventions.
• Subject Access Requests. One of the DUAA measures is that searches in response to a subject access request need to be undertaken only to the extent that they are "reasonable and proportionate". The DUAA also allows the response time to be paused while waiting for clarification or more information.
• Data Protection Complaints. The Information Commissioner's Office (ICO) guidance on dealing with data protection complaints sets out clear obligations for accessible channels, timely acknowledgement, investigation records and ICO escalation routes
• Looking Ahead. PASA recommends that schemes should audit and refine processes for safeguarding vulnerable members, member identification and managing subject access requests. It also recommends that trustees and administrators should consider how to weave the new data protection complaints requirements into existing frameworks.

Return to Contents.

Authored by Jill Clucas and Susanne Wilkins.