HL UK Pensions Law Digest 2 December 2025

Welcome to our latest update, in which we cover:

Autumn Statement and HMRC publications: issues relevant to pensions

• Recent publications by HMRC with further detail on Budget announcements;

Court of Appeal: certain unfunded unapproved pension arrangements were tax avoidance schemes

• Liabilities for unfunded pensions were not deductible from the employer’s profits;

High Court rejects appeal by trustees/administrator in pensions liberation case

• The High Court has dismissed an appeal against a Pensions Ombudsman determination in a pensions liberation case

Pensions Regulator (TPR) publishes a market oversight report on member data quality

• TPR has published a market oversight report on member data quality and high level proposals for next steps

Pensions Regulator (TPR): scheme member data quality

• Updated guidance from TPR explains practical steps and good practice;

Pensions Dashboards Programme (PDP): data preparation

• A blog by PDP highlights the benefits of good data preparation for members and schemes;

Annual Revaluation Order

• The annual order setting rates for calculating revaluation in deferment and minimum pension increases.

The Society of Pension Professionals publishes paper on pre-1997 indexation of defined benefit pensions

• The Society of Pension Professionals has published a paper on the implications of pre-1997 indexation for defined benefit pensions, suggesting a scheme-specific approach

Autumn Statement and tax developments 

For our overview of developments relevant to pensions announced in the Budget Statement, please click here.

In addition, HMRC has issued the following documents;

HMRC Policy paper: Inheritance Tax – unused pension funds and death benefits

HMRC’s paper largely explains developments which have already been announced on bringing certain pension scheme death benefits within the scope of inheritance tax (IHT) for deaths on or after 6 April 2027. HMRC Pensions Newsletter 175 includes a few further details. Points of interest include:

• Confirmation that dependants’ scheme pensions from defined benefit (DB) or collective money purchase (CMP) arrangements will not be subject to IHT. The implication is that a dependants’ scheme pension provided from a money purchase arrangement will be part of the deceased’s estate for IHT purposes.
• Personal representatives (PRs) will have to report the amount of IHT attributable to each of the deceased’s pension schemes. PRs may direct pension scheme administrators (PSAs) to pay the IHT due on pensions direct to HMRC, or to reimburse the PRs for IHT on pensions which has already been paid.
• Where PRs reasonably expect IHT to be due on pension scheme death benefits, they may also direct PSAs to withhold 50% of death benefits for up to 15 months, to ensure that sufficient money is retained to cover any potential IHT liability. PRs may not require PSAs to withhold:
  • benefits payable to exempt beneficiaries (a surviving spouse, civil partner or charity);
  • benefits under £1,000; or
  • continuing annuities.
• After PRs have been granted a clearance certificate (showing that they have paid all IHT due), the PRs will not be liable for IHT payable on any pensions which are subsequently discovered, provided that HMRC is satisfied the PRs had made every effort to locate all the deceased’s pension arrangements.
• HMRC intends to mitigate the additional burden on PRs, PSAs and beneficiaries by providing guidance, an Inheritance Tax Checker Tool and a straightforward system for paying the IHT liability on pension benefits.

HMRC Policy paper: Collective money purchase schemes – registration for unconnected multiple employers

HMRC’s paper explains that provisions in the Finance Bill 2025-26 will enable the establishment and registration of unconnected, multi-employer schemes (UMES) which provide collective money purchase (CMP) benefits. (This follows final regulations recently issued by the DWP concerning authorisation criteria and other requirements for UMES arrangements.)

The Finance Bill provisions will:

• Treat a UMES as an occupational pension schemes for tax purposes;
• Enable a UMES to apply for registration by HMRC; and
• Enable HMRC to refuse registration if a UMES is not authorised by the Pensions Regulator (TPR) and to deregister a scheme which becomes unauthorised.

HMRC Pensions Newsletter 175

HMRC’s latest newsletter contains a round-up of pensions-related announcements from the Autumn Statement. Points of interest in relation to pensions and inheritance tax (IHT) are included above.

In relation to allowing payments of defined benefit (DB) surplus direct to members over normal minimum pension age (NMPA), the Newsletter explains that:

• The payments will be authorised payments for tax purposes and will be subject to income tax at the recipient’s marginal rate;
• Payments to members may only be made if the scheme is in surplus on the same funding basis as applies to surplus payments to employers; and
• Legislation will be included in the Finance Bill 2026-27, to have effect from 6 April 2027.

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Unfunded unapproved retirement benefit schemes were tax avoidance schemes 

The Court of Appeal has dismissed an appeal by two companies against decisions by the First-Tier Tribunal (FTT) and Upper Tribunal that liabilities to pay unfunded pension promises for directors and senior personnel were not expenses “wholly and exclusively” incurred for the purposes of the companies’ trade (A D Bly Groundworks and Civil Engineering Limited and another v HMRC). The arrangements were found to be primarily tax-driven, with pension provision only incidental. It followed that the liabilities could not be deducted from the companies’ profits for corporation tax purposes.

Background

• The appellants were two companies, AD Bly Groundworks and Civil Engineering Limited and CHR Travel Limited, which had set up unfunded unapproved retirement benefit schemes (UURBSs) for their directors and key employees.
• The appellants made provision in their accounts for the liability to pay future pensions and claimed deductions for those provisions against their profits for corporation tax purposes.
• The arrangements had been marketed to the appellants by their accountants, Charterhouse (Accountants) Limited. It appeared that Charterhouse had marketed similar arrangements to a number of its other clients and had notified these to HMRC, in accordance with disclosure of tax avoidance requirements.
• HMRC issued closure notices disallowing the corporation tax deductions for the appellants and other Charterhouse clients. The appellants’ appeals were designated as “lead cases”.

Dismissal by the Court of Appeal

• The Court of Appeal agreed with the Upper Tribunal that the FTT had made no error of law and had correctly applied principles from leading caselaw to the facts of the case.
• The FTT had made a clear finding of fact that the real driver behind the arrangements was not pension provision but saving tax, and that providing pensions was, at most, an incidental aim. The FTT had considered it significant that:
  • Witness statements from senior individuals from both appellants were almost identical, which suggested that Charterhouse had told the witnesses what to say; and
  • If incentivising and retaining senior personnel had been the primary objective behind the arrangements, the appellants would be expected to have sought specialist advice on executive remuneration, including analysis of comparator companies’ practices. However, there was no evidence of this having been done.
• It was not always the case that expenses incurred in paying remuneration would satisfy the “wholly and exclusively” test. Here, pension provision had been made with the object of artificially reducing the appellants’ taxable profits.

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High Court rejects appeal by pension scheme trustees/administrator in a pension liberation case 

In Brambles Administration Limited v Harvey, the High Court has rejected an appeal against a Pensions Ombudsman (TPO) determination by the trustees and administrator of certain pension schemes, in a pensions liberation case. The appellants comprised the administrator of those schemes, two corporate trustees and two individual trustees.

The case concerned three registered pension schemes. The schemes were designed to circumvent the rules which prevent members from accessing their pension funds before normal minimum pension age, by deeming payments to members to be capital gains on the sale of assets, rather than early access to pension benefits. The schemes' investments were found by TPO to be "high risk, narrow illiquid and undiversified" and "worthless".

TPO's determination sought to require the trustees/administrator to (i) pay compensation to scheme members; and (ii) to make good the scheme investment losses of around £5.2m. This included holding two trustees liable in their personal capacity.

The appeal was on four distinct, limited grounds. Throughout its deliberations, the High Court was careful to highlight the application of section 151(4) of the Pension Schemes Act 1993, which allows an appeal of a TPO determination only on a point of law. The Court was rigorous in not allowing the appellants to reopen findings of fact.

TPO's jurisdiction: appellants argued that the complaint was out of time

The complaint was brought to TPO in 2022. The High Court considered whether this was within the time limits in Regulations, very broadly, whether it was within three years of the date at which the complainants knew, or ought reasonably to have known, that they had been "scammed".

In the determination, TPO distinguished between the complainant's knowledge of "peripheral issues", such as liquidity problems, of which one complainant was aware as far back as 2015; and the "true acts and omissions" relating to the suspicion of a scam (which TPO attributed to May 2019). TPO also concluded that a second complainant who admitted "getting a bit dubious" in 2015 was not necessarily aware that he was being scammed at that point.

Applying s151(4) of the Pension Schemes Act 1993, the Court concluded that TPO had been entitled to reach those conclusions on the evidence.

Scheme structure: the appellants argued that each scheme was made up of a series of sub-trusts, rather than being a single trust fund

In arguing that the schemes held assets on a series of sub-trusts for each individual member, rather than a single fund, the appellants were seeking to challenge TPO's direction that they reconstitute the entire fund. The appellants argued that, if the trustees held assets on separate sub-trusts for each individual member, then the appellants would have separate liabilities to the individual complainants. It might also lead to a reassessment of the need for diversification of investments within each sub-trust.

This issue turned on the specific wording in the schemes' rules, which, for example, referred to "Individual Funds". The Court also noted that the rules of one scheme referred to each member having “a separate and clearly designated account".

The High Court rejected the appellants’ arguments. In particular, the Court distinguished the concept of sub-trusts from an "accounting tool" (the separate accounts) used to determine each member's benefits.

Dishonesty and exoneration clauses

The appellants sought to challenge TPO's findings of dishonesty against the trustees/administrator, which meant that the appellants could not rely on the exoneration clauses in the schemes' governing documentation. They argued that TPO had held the trustees to too high a standard by failing to acknowledge that the appellants had a "much lower level of knowledge and experience" than a professional trustee.

The Court, again, cited section 151(4) of the Pension Schemes Act 1993 and emphasised its need to consider only whether TPO reached a conclusion that was available on the evidence, was not perverse; and took into account only relevant considerations. The Court concluded that "there were cogent factual findings that amply support" TPO's conclusions "whatever the appellants' degree of experience".

Member consent: appellants argued that TPO should have concluded that one of the complainants had consented to certain loss-making transactions, or that he was contributorily negligent in relation to them

Having already upheld the findings of dishonesty, the High Court concluded that the appellants would not be able to establish lack of consent or contributory negligence.

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Pensions Regulator: a market oversight report on member data quality 

On 18 November, the Pensions Regulator (TPR) published a market oversight report on member data quality. This follows its initiative last year to engage with schemes which may not be meeting TPR's expectations on data quality, especially in light of the introduction of pensions dashboards. Dashboards will require both data to find savers in records ("match data") and the information to return to savers ("value data"). However, TPR emphasised that data quality is "not a one-off exercise" and encouraged trustees to build on the momentum created by preparing for dashboards.

Key points include:

• Most schemes were able to provide TPR with their data scores when requested.
• In relation to scheme-specific data, TPR found that several common elements that should be present across all schemes were not consistently included. TPR's report notes that scheme-specific data needs to cover the data items a scheme needs to calculate pension values, process member queries and events, and specific features of the scheme (such as contracting-out or remediation exercises).
• Some data accuracy tests used by schemes were relatively simplistic, and some did not apply the scoring methodology appropriately. TPR notes that some schemes calculated the score based on the number of data items failed, and not on the number of members for which one or more data items failed. In some cases, they calculated one score to cover both common and scheme-specific data.
• Additionally, some schemes with multiple sections only provided TPR with the score for one section, rather than a combined single overall score for the scheme.
• The level of detail in the data quality assessment reports varied and some reports lacked detail on the testing methodology used.
• Improvement plans tended to be informal or fragmented, and some schemes only had vague timescales (e.g. "by Q2 2026"). Very few schemes provided TPR with standalone documents that showed they had followed all the steps in the guidance.
• "Value data" will be a key focus for TPR in its next phase of industry engagement on dashboards data. TPR's report noted that few schemes were actually preparing their value data.
• The reliance on administrators was a recurring theme and TPR's report reminds trustees of the need to take an active role in data management. It suggests that trustees obtain and scrutinise regular reports from the administrator and ensure administrators have adequate controls and processes in place to maintain good quality data. However, TPR also noted that there were some examples of good data governance, including quarterly discussions on data at trustee boards, and sub-committees focused specifically on administration, including data.

TPR confirmed that it is defining further work on data preparations for dashboards, for launch in 2026. TPR may intervene where schemes are unable to demonstrate how they meet expectations. TPR's intervention may include seeking voluntary improvements within a given timescale and/or issuing improvement notices where appropriate, requiring schemes to take specific action within specific timeframes or face enforcement action.

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Pensions Regulator: scheme member data quality 

The Pensions Regulator (TPR) has issued updated guidance on Scheme member data quality, to set out practical steps and good practice for meeting TPR’s expectations in the data monitoring and improvement module of the general Code of Practice. The guidance was previously published under the title “Record-keeping”.

TPR’s expects trustees or managers to have sufficient understanding and experience in data management and administration and to take an active role in managing scheme data, including through:

• Regular consideration of data quality at board meetings;
• Inclusion of data quality on the scheme’s risk register;
• Allocation of sufficient resources to resolve any data issues which arise; and
• Keeping up to date on relevant developments and best practice.

TPR’s expectations for administrators include conducting regular data reconciliation, member tracing and mortality screening exercises,; and regular measurement of data quality, with escalation of common issues and their impact to the governing body.

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Pensions dashboards: benefits of data preparation 

The Pensions Dashboards Programme (PDP) has published a blog highlighting some of the broader benefits for schemes and members of investing in data quality, including:

• A likely reduction in the number of “possible matches” from individuals’ searches using pensions dashboards, meaning that fewer people will need to follow up with their scheme or pension provider to determine whether there is a definite match;
• Member queries may be answered more simply and swiftly, with less drain on administration resources;
• Increased trust by individuals in the dashboards service; and
• Enabling trustees to run real-time analysis using accurate data, instead of relying on assumptions.

The blog includes comment from the Pensions Regulator (TPR) on the regulatory perspective, including a reminder that data is considered a governance issue and that schemes which fail to ensure good quality data may face enforcement action. TPR points out that its updated guidance on data quality sets out practical steps for schemes to ensure high quality data.

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Annual revaluation order

The Occupational Pensions (Revaluation) Order 2025/1211 has been made. The Order comes into force on 1 January 2026 and sets:

• The minimum revaluation rate for deferred defined benefit (DB) final salary pensions (excluding guaranteed minimum pensions) in deferment; and
• The “appropriate percentage” used for calculating minimum increases to DB pensions in payment.

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The Society of Pension Professionals publishes paper on pre-1997 indexation of defined benefit pensions 

At present, defined benefit (DB) pension schemes are not required to provide inflation-linked increases in respect of pension benefits accrued before April 1997.

On 18 November, the Society of Pension Professionals (SPP) published a paper examining the implications of pre-1997 indexation for (DB) pension schemes. The paper follows increased lobbying around the issue, prompted by the passage of the Pension Schemes Bill which includes, for example, proposals for increased flexibility to apply scheme surpluses.

The SPP paper covers the costs involved, scheme member perspectives, trustee duties and considerations for employers. It also highlights some of the issues with a proposed across-the-board legislative change, including the risk of unintended consequences - and comments on potential solutions.

The SPP argues against mandating pre-1997 indexation; instead preferring a scheme-specific approach which recognises the differences in stakeholder needs, scheme finances, and legal structures. The SPP paper encourages policymakers to focus on the adequacy of pension provision for future generations as well as legislative change to permit one-off discretionary payments to members, instead of requiring longer term commitments.

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Authored by Jill Clucas and Susanne Wilkins.