In this news update, we highlight legal developments in UK pensions over the past fortnight.
This update covers:
- Finance Act 2025 receives Royal Assent
- Pension Minister’s speech to the PLSA conference
- HM Treasury paper on overhauling regulation in the UK
- Pension dashboards: reminder of steps to connection
- New pension regulations
Finance Act 2025 receives Royal Assent
On 20 March last week, the Finance Bill received Royal Assent and became the Finance Act 2025.
The provisions relevant to pensions make changes to:
Further details are given below.
Overseas tax charge (section 32)
Section 32 has the effect that an overseas transfer charge (OTC) of 25% will apply on transfers to schemes in the EEA or Gibraltar in the same circumstances as on a transfer to a non-EEA QROPS.
The amendments made by section 32 apply to transfers made on or after 30 October 2024 (the date of the Chancellor’s Autumn Statement), except where:
- The request to transfer was made before 30 October 2024; and
- The transfer is made before 30 April 2025.
As a reminder, the OTC does not apply where, broadly, one of the following applies:
If one of the above exclusions applies but the transfer value exceeds the member’s “available overseas transfer allowance”, then the OTC will apply to the excess. The member’s available overseas transfer allowance is equal to the member’s lump sum and death benefit allowance (LSDBA) less, broadly:
- The total of any amounts previously transferred overseas from a UK registered pension scheme on or after 6 April 2024; plus
- If the member used any lifetime allowance prior to 6 April 2024, the member’s “adjusted lifetime allowance previously used amount”.
Transfer to overseas pension schemes established in the EEA (section 33)
From 6 April 2025, section 33 removes the differential treatment of pension schemes established in the European Economic Area (EEA), so that the same conditions for being a qualifying recognised overseas pension scheme (QROPS) will apply to both EEA and non-EEA schemes:
- For overseas occupational pension schemes;
- The scheme must be regulated by an occupational pension schemes regulator in the country in which the scheme is established; or
- There is no regulator of occupational pension schemes in that country.
- For overseas non-occupational pension schemes:
- The scheme is regulated by a regulator of non-occupational pension schemes in the country in which the scheme is established: or
- There is no regulator of non-occupational schemes in that country but there is a regulator of scheme providers, and both the provider and the establishment of the scheme are regulated by that provider.
In addition, the pension scheme must be established in a country which has a Double Tax Agreement or a Tax Information Exchange Agreement with the UK. The current exemption for schemes established in the EEA will be repealed.
This April, HMRC plans to write to managers of QROPS in the EEA to ask for confirmation that the schemes meet the new conditions. A scheme which does not respond or comply with the conditions will cease to be a QROPS (see HMRC Newsletter 167).
Pension scheme administrators to be resident in UK (section 34)
From 6 April 2026, the administrator of a UK registered pension scheme must be resident in the UK. (Currently, a scheme administrator may be resident in the EEA instead of the UK.)
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Pensions Minister’s speech to PLSA conference
In a speech on 11 March at the Pension and Lifetime Savings Association (PLSA) Conference 2025, the Pensions Minister, Torsten Bell, set out the DWP’s priorities for pension reform. Key points included:
Investment
- The first stage of the government’s Investment Review, launched in July 2024 after the General Election, will be finalised in “coming weeks”.
- The government’s 10-year infrastructure strategy will be published this June.
- The government intends to keep to its March 2026 timeline for pooling assets in the Local Government Pension Schemes (LGPS).
Defined benefit (DB) schemes
- The government’s response to the consultation on “Options for DB schemes” will be published this spring.
- Flexibility in relation to surplus will allow well-funded DB schemes to release resources back to business and to members, where it is safe to do so and trustees agree. The government considers that trustees best placed to determine the appropriate use of any surplus, in consultation with the employers.
- When considering the use of surplus, trustees may wish to consider the position of members with non-increasing pre-1997 pensions.
- The government is committed to legislating for a permanent regime for DB Superfunds.
- The government is considering allowing the Pension Protection Fund (PPF) greater flexibility to reduce the PPF levy when collecting the levy is not needed to fund the PPF.
Pensions Bill
- The Pensions Bill will be introduced before the Parliamentary summer recess.
- The Bill will be based on the final report of the Investment Review, plus the wider changes outlined in the King’s Speech in July 2024, including reducing costs in the system and putting decumulation on a “firmer footing”.
- (As a reminder, in relation to pensions the King’s Speech included: the automatic consolidation of defined contribution (DC) small pots; establishing the Value for Money Framework for occupational pension schemes; and requiring DC occupational schemes to offer a default retirement income solution.)
- Capacity constraints mean that not everything which could be legislated for will actually make it into the Bill. In particular, pension adequacy (which we take to mean lowering auto-enrolment thresholds and/or increasing auto-enrolment contribution rates) is treated as “phase 2”, to be addressed after reducing costs and introducing decumulation solutions.
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New approach to ensure regulators and regulation support growth
HM Treasury issued a Policy Paper on 17 March 2025, setting out the government’s approach to reforming regulation. The Paper follows the Chancellor’s speech on 29 January this year, in which regulatory reform was flagged as a key part of driving UK growth.
The Paper recognises that well-designed and implemented regulation can support growth by protecting consumers and ensuring fair practices. However, the government is concerned that the current regulatory landscape in the UK imposes significant burdens on businesses, in particular with overly onerous and disproportionate reporting requirements.
Pensions Regulator (TPR)
The Policy Paper includes pledges from key regulators to develop measures which are implementable within the next 12 months. TPR has made the following pledges:
- To review capital reserve requirements for Master Trusts, with a view to safely freeing up millions of pounds for schemes by the end of 2025/26;
- By the autumn of 2025, to develop an innovation framework and hub to test innovation ideas and services with the market;
- To reduce unnecessary regulatory burdens and improve data sharing, including a review of TPR’s requirements for data collection in the scheme return and supervisory return, by the end of March 2026;
- To encourage scheme consolidation and consideration of productive asset investments, including through:
- Encouraging voluntary disclosure of asset allocation data; and
- Disclosure of long-term risk-adjusted net returns through the Value for Money Framework.
Financial Ombudsman Service (FOS)
As part of the regulatory reform agenda, the Economic Secretary to the Treasury has been asked to examine whether FOS is delivering its role as a simple, impartial dispute resolution service working in concert with the Financial Conduct Authority (FCA). The examination will include concerns around:
- Whether FOS acts, at times, as a quasi-regulator;
- Whether FOS applies current standards to events which took place in the past; and
- Compensation practices which have developed over time.
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Pension dashboards blog: connecting to the dashboards ecosystem
The Pensions Dashboards Programme issued a blog on 18 March 2025, reminding schemes and pension providers of the steps they should be taking to connect with the pensions dashboards ecosystem effectively.
The reminder comes as we approach the first “connect by” date (30 April 2025), applicable to DC Master Trusts with 20,000 or more members and to personal pensions (including retirement annuity contracts and section 32 buy-out policies) with 5,000 or more members.
Key points
- Confirm your “connect by” date: Pension providers and schemes should identify their specific “connect by' date set out in the March 2024 guidance from the Department for Work and Pensions (DWP). Compliance with the connect by date is not a statutory requirement, but schemes and providers must have regard to the guidance.
- Confirm your route to connection, if not already done: PDP expects that schemes and providers should have already decided whether to connect to the dashboards ecosystem directly, or through a third party, such as the scheme administrator or an integrated service provider (ISP).
- Consult dashboard standards: The pensions dashboards standards drawn up by PDP and approved by the DWP form part of the regulatory framework and outline requirements for connecting to dashboards.
- Prepare your data: Ensuring data reliability is crucial. Schemes and providers should conduct audits to identify and remedy any inconsistencies in pension data, which will help improve match rates once dashboards are operational.
- Decide your data matching approach: Schemes and providers must decide their own criteria for data matching (for example: first name, last name and date of birth) to identify if an individual making a find request has pension rights under a particular scheme
- Stay updated: PDP recommends signing up for its updates, in addition to updates from the Financial Conduct Authority (FCA) and Pensions Regulator (TPR).
- Use PDP guidance and support: PDP offers various resources through its connection hub, plus blog posts and articles.
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New pensions regulations
Pensions Increase (Review) Order 2025/343
This Order will come into force on 7 April 2025 and sets the annual increase for official (public service) pensions in payment at 1.7%.
Guaranteed Minimum Pensions Increase Order 2025/264
This Order comes into force on 6 April 2025 and provides that guaranteed minimum pensions (GMPs) in payment must be increased by 1.7%.
The draft Pension Fund Clearing Obligation Exemption (Amendment) Regulations 2025
These draft regulations were laid before Parliament on 17 March 2025 and will extend the existing exemption for pension funds from the obligation to clear certain derivative contracts through a central counterparty (CCP). The current exemption is due to expire on 18 June this year. As amended, the exemption will have no time limit.
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