HL UK Pensions Law Digest 27 May 2025

Welcome to our latest update, in which we cover:

• Protecting member identities during high risk events
  • Guidance from the Pensions Administration Standards Association (PASA) on reducing the risk of identity fraud at different stages of the member lifecycle;
• Pensions Regulator (TPR): innovation support service
  • TPR has announced the launch of its new service to support innovation in pensions;
• Pensions Regulator (TPR): speech at Professional Pensions Live 2025
  • TPR has delivered a speech outlining its focus on value and on enabling good decision-making at retirement.
• DWP: release of surplus
  • The DWP has issued a press release anticipating new legislation to allow release of surplus;
• Pensions Minister: Parliamentary question on transfers
  • The Pensions Minister has briefly responded about plans to improve the transfer process for defined contribution (DC) pots.

PASA: guidance on protection of identities during high risk events

• The Pensions Administration Standards Association (PASA) has issued guidance for pension schemes on protecting members from identity fraud.
• The guidance considers the various means of verifying a member’s identity (typically at the start of a process such as registering for a portal) and subsequent ongoing authentication whenever the member seeks to access their pension arrangement.
• The guidance identifies the points in the member lifecycle likely to pose most risk as being: changes to member data (such as contact details); transfers; retirement and death.
• General points in relation to risk and recommended ways of reducing risk include the following.

How identity fraud may be carried out

Identity fraud may be carried out in various ways, including by:

• Taking over a member’s online account and making changes to personal details, such as adding or removing an authorised signatory;
• Manipulating individuals to gain unauthorised access to systems or information (social engineering);
• Using AI to manipulate or generate biometric data or official-looking documents;
• Using synthetic identities, created with some real and some false data;
• Employees of the employer or administrator, who may have access to significant data about a member, including their National Insurance (NI) number;
• Impersonation of a member by family members, for example after the member’s death in order to keep receiving instalments of pension.

Verifying and authenticating identities

Recommended ways of reducing risk when verifying or authenticating members or beneficiaries include:

• Using a combination of approaches to verification and authentication (potentially: information known only to the member such as a PIN; biometric data; confirmation of key information such as NI number or historic addresses; and one-time passcodes);
• Being aware of whether data used to identify an individual could have been accessed by someone else (such as a membership number and address on a hard copy letter);
• Treating “gone away” returned post as a potential risk; and
• Maintaining up to date member data, including through tracing exercises for deferred members.

Precautions at high risk points in the member lifecycle

Recommended ways of mitigating risk include:

• Changes of member details
  • Limiting unauthorised or non-evidenced changes of data and requiring identity authentication before making a requested change;
  • Confirming changes to contact details, especially phone numbers or email addresses, through another means of communication, and potentially in writing to the member’s home address;
• Transfers
  • Verifying the member, the receiving scheme and any independent financial advisor (IFA), including by verifying company details;
  • Verifying the identity of a former spouse before making payments on divorce;
• At retirement
  • Maintaining up to date records before sending retirement information: out of date contact details can result in details of an individual’s pension being divulged to unauthorised persons;
• On death
  • Identifying and investigating inconsistencies or omissions when collating information about potential beneficiaries;
  • Checking where appropriate about changes in potential beneficiaries following divorce or remarriage;
  • Verifying beneficiaries’ identities and status in relation to the member, in addition to checking birth or marriage certificates;
• Vulnerable members
  • Identifying vulnerable members and flagging vulnerability on member records;
  • Exercising appropriate diligence where a member is in a care home or a power of attorney is in place. This may include checking with the Office of the Public Guardian;
• Overseas members / overseas transfers
  • Taking additional care, especially where usual verification methods are not available; and
  • Considering use of specialist forensic services for overseas checks.

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Pensions Regulator (TPR): launch of innovation service

The Pensions Regulator (TPR) has announced the launch of its innovation support service, focussed on supporting developments in two areas in particular:

• Administration and member experience, especially in decumulation; and
• Investment and new models for pension schemes (such as superfunds and other emerging models).

The service will enable informal discussion with TPR at early stages of the development of new pension solutions, as well as facilitating connections across industry, regulators and government.

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Pensions Regulator (TPR) speech

Nausicaa Delfas, Chief Executive of the Pensions Regulator (TPR) has given a speech at Professional Pensions Live 2025, focussing on two central tenets:

• Ensuring value across both defined benefit (DB) and defined contribution (DC) systems; and
• Enabling savers to make informed decisions at retirement.

Key points are as follows.

Value in defined benefit (DB) arrangements

• Real value in a DB arrangement means providing members with the best opportunity to receive the benefits promised or, in some cases, enhanced benefits.
• TPR will soon publish guidance on endgame options, to help trustees to ask the right questions when deciding how best to ensure that promises to savers are met.
• Over the next year, TPR’s approach to DB supervision will incorporate the principles of the DB funding regime and will focus on areas of greatest risk.

Value in defined contribution (DC) arrangements

• TPR will continue to challenge poor value schemes; encourage transparency around performance; and take steps to simplify the system.
• Value should be assessed across the market as a whole, not just against internal benchmarks. The value for money (VFM) framework should result in standardised data and meaningful metrics, to enable better value assessment.
• So far, one in five DC schemes questioned by TPR about value has decided to exit the market.
• Before the VFM framework is brought in, TPR will encourage Master Trusts to disclose asset allocation data voluntarily.
• Over the coming year, TPR will seek to understand the sort of investment opportunities likely to be attractive to pension schemes, to help inform steps by government to encourage opportunities for growth investment.

Small pots

• As well as working with government and industry bodies on proposals for the Small Pots Data Platform, TPR will seek to understand how schemes are currently managing small pots.

Enabling informed decisions at retirement

• TPR reiterates the central importance of good data to the functioning of pensions dashboards. In this regard, over the following year TPR will focus on:
  • Continuing its data quality regulatory initiative; and
  • Working towards common data standards.
• TPR will support the development of collective defined contribution (CDC) arrangements through a code of practice and authorisation regime.
• TPR’s new innovation support service (please see above) will provide opportunities for confidential discussions on potential new products and services to support better decision making at retirement.

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DWP announcement: pension surplus and growth

• The DWP has issued a press release confirming that the forthcoming Pension Schemes Bill will allow trustees and sponsoring employers of all defined benefit (DB) schemes to release some surplus to boost investment and to benefit scheme members. Legislative changes will focus on member protection and trustees will still have to comply with duties to scheme members.
• Comments in the press release suggest that schemes may be permitted to release surplus above the low dependency funding measure.

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Transfers: questioning the Pensions Minister

The Pensions Minister, Torsten Bell, has responded to a Parliamentary question regarding improving the transfer process for defined contribution (DC) pots. In summary:

• The DWP is working with industry and regulators to identify potential changes to the transfer process to increase efficiency while ensuring consumer protection.
• The Financial Conduct Authority (FCA) and the DWP are considering responses to the FCA’s discussion paper (DP24/3, December 2024) on ensuring that members wishing to transfer make well-informed decisions, and that transfer requests are actioned efficiently.
• The DWP is considering whether the practical effect of the Transfer Conditions Regulations (SI 2021/1237) (which include the provisions around red and amber flags) could be improved, while retaining appropriate protection for members.

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Authored by Jill Clucas.