Clive Weber
- Consultant
- Pensions & Employee Benefits
Pension Schemes Bill due to be laid in parliament on 5th June 2025 – Giant STEP forward?
Spanning almost the entire pensions universe the Bill’s proposed changes are fundamental to the operation of schemes.
Undoubtedly the Government’s aims are bold: to slant schemes’ investments in ways the Government perceive to be in the interests of the UK economy, improving the lot of members by hopefully enhancing investment returns, and releasing – so the Government hopes – vast amounts of surplus in DB schemes for the benefit of sponsoring employers and scheme members.
Initial views from the Wedlake Bell Pensions & Employee Benefits Team
Timescale – It is exciting to see so many fundamental and diverse changes, but the reverse of the coin is the long time for the Bill to reach the Statute book on completion of its Parliamentary passage and Royal Assent and for the changes to become operational. Although the starting point is June 2025, it could be mid-to late 2026, or may be later, before all of the changes take effect. Not only is there the Bill’s long passage through Parliament but many sets of Regulations will be needed, along with Guidance documents from various pension authorities, such as the Pensions Regulator, to complete the detail.
The likely long timescale is not an excuse for schemes not addressing the changes. However, final decisions may be difficult until the new regime is in legal terms fully in place. The Wedlake Bell Pensions Team will be closely monitoring progress of the Bill.
Bill’s provisions – the below chart is an overview highlighting the Bill’s main changes. Our forthcoming edition of Pensions Compass will provide a detailed critique of the Bill. Please click here to add your details to our mailing list if you do not already receive Pensions Compass.
Pension schemes Bill – Overview
DB Schemes
| Topic | Provisions in Bill |
| Surplus Reforms | Provisions are included to make it easier for surplus from DB schemes to be paid to employers and/or given to scheme members as additional benefits. Where a scheme does not include power to share surplus, trustees are given a power to modify. There will no longer be a need for trustees first to have passed a resolution under section 251 Pensions Act 2004. The government Policy document issued on 29 May 2025 indicated the Government is minded to replace the existing buyout threshold for surplus use with a new threshold set at the full funding low dependency level. The position is still unclear. We expect subsequent regulations will determine the restrictions on the exercise of power to pay surplus including any prescribed actuarial conditions. As mentioned in the May 2025 Policy document, there is no restriction in the Bill on how extracted surplus should be used. The Trustees’ duty will be to continue to act as fiduciaries. Government continues to consider the operation of tax provisions in the context of the new surplus extraction rules. |
| Consolidation of DB Schemes / DB Superfunds | New permanent legislative framework applicable to authorisation and supervision of DB superfunds, including rules on capital extraction and allowing new providers to enter the market. |
| Public consolidator | The Government needed to decide whether to legislate for a DB public consolidator, likely to be run by the PPF, as suggested by the previous Government. This idea has not been taken forward in the Bill. Instead the Government continues to explore the role a small focused government consolidator could play, if established. |
DC Schemes
| Topic | Provisions in Bill |
| Consolidation of large DC Funds | The Bill introduces a contractual override, with strong consumer safeguards for the contract-based part of the pensions market. |
| Draft legislation on consolidating small DC deferred pots | The objective is for certain DC pots under a specified value to be, subject to opt-out rights, automatically swept up in one or more consolidator schemes. The Bill contains framework provisions for this, with Regulations providing further detail to be drafted during 2026. This will likely not be fully implemented until 2030. |
| Value for Money (VFM) framework | New VFM framework for trust-based DC funds to hopefully improve members’ DC benefits. |
| Duty on certain DC trust based schemes to offer members retirement income solutions | Duty on trustees to offer a retirement solution, or range of solutions, including default investment options, to their members. Many sets of regulations are likely to be needed to flesh out the Bill’s provisions. |
| CDC (Collective Defined Contribution) schemes for multiple unconnected employers. | See DWP press release 29/4/2025 describing the proposed provisions and stating the intention to lay Regulations in Parliament in Autumn 2025. It seems these proposals are within the authority of pre-existing pension legislation and so are not dependent on the Pension Schemes Bill. |
| Measures to encourage DC scheme trustees to invest in particular ways | See generally the Government’s Final Report on its Pension Investment Review (published on 29th May 2025). Relevant reserve powers are included in the Pension Schemes Bill in case schemes do not voluntarily invest as government would wish. |
| Consolidation Provision – DC mega-funds | Provisions aimed at certain schemes in multi-employer defined contribution market to operate as mega-funds in relation to at least one main default arrangement by 2030. |
Other provisions
| Topic | Provisions in Bill |
| Local Government Pension Scheme | Investment pooling of funds. See generally government’s above Final report. |
| Pensions Ombudsman a “competent court” |
To assist trustees recouping overpayments made to members. |
Contact
For queries on this Press Release and on the Pension Schemes Bill generally, please contact your usual Pensions Team adviser.
This article is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases.
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James Newcome
- Senior Associate
- Pensions & Employee Benefits
Justin McGilloway
- Partner
- Pensions & Employee Benefits
