Why the Pension Schemes Bill could be ‘crammed to bursting’

When the King announced in July 2024 that there would be a Pension Schemes Bill in the current session of Parliament, it sounded as though it would include some meaty measures for our legislators to consider.

But subsequent developments suggest it will now be a blockbuster when published, and with the possibility of even more measures being added as the Bill goes through Parliament. In this blog we set out our current assumptions about what will be – or may be – in the Bill. Hopefully all will be revealed before too much longer. 

Main measures flagged at the time of the King’s Speech  

Starting with the measures announced last summer, these mainly relate to DC pensions. The key ones were: 

• Default decumulation - a new duty on DC scheme trustees to offer a suite of decumulation products and services, which are suitable for their members and consistent with pension freedoms. Such services are to act as a backstop unless the member makes an active choice. 
• Small pot consolidation – this will provide for a ‘multiple default consolidator’ model, whereby certain DC pots under a specified limit will be automatically swept up into a consolidator scheme; DWP has indicated that a feasibility review for the proposed Small Pots Data Platform needs to be undertaken (expected June 2025), so it may be that the first published version of the Bill does not include all of the necessary primary legislation. 
• Value for money - Whilst the framework for contract-based schemes is being finalised by the FCA, the Bill will need to contain measures to apply the framework to trust-based schemes. The King’s Speech said that a standardised test will be introduced that trust-based DC schemes will need to meet to demonstrate they deliver value for money. 

The other major measure mentioned last summer related to a primary legislative framework for DB superfunds. Although the Pensions Regulator has established an interim regime which allowed Clara to set up as the first DB superfund, the new legal framework is expected to include rules on capital extraction and to pave the way for new providers to enter the DB superfund market. 

Most legislation also includes more detailed ‘tidying up’ measures. One which has been flagged for this Bill is that it will re-establish that the Pensions Ombudsman is a competent court for the purposes of concluding overpayment disputes where recoupment is sought. This will then reverse the November 2023 Court of Appeal decision. In 2022 there was a High Court case concerning the construction of a forfeiture clause which the Ombudsman decided to appeal on the Court’s finding that the Ombudsman was not a competent court. In November 2023 the Court of Appeal upheld the High Court’s decision.

Legislation arising from subsequent policy initiatives 

a) Pensions Review 

In Summer 2024 the Government launched the first phase of its Pensions Review, focusing on consolidation in the Local Government Pension Scheme (LGPS) and on the investment strategy of DC pension schemes. Legislation is likely to be needed to strengthen the current process of pooling assets across the LGPS and to promote DC ‘mega funds’, gradually forcing the market in the direction of a smaller number of relatively large DC Master Trusts. 

b) DB surplus distribution 

Although the King’s Speech was silent on the matter, in January 2025 the Government said that it would legislate to make it easier for surplus from DB schemes to be paid to employers or to be given to scheme members as additional benefits. We’re eagerly awaiting a response to the DB Options consultation issued by DWP in February 2024 which will hopefully confirm more detail and that relevant enabling clauses will be included in the Bill. This could include additional protection for members for example from enhanced PPF protection (see our Powering possibilities proposal and also below).  

If the Government decides to go ahead with encouraging DB surplus distribution, one issue which will have to be addressed is the ‘Virgin Media’ case which is currently creating uncertainty in the pension's world and on which the Government is being asked to provide a legislative solution. 

c) The Pension Protection Fund (PPF)  

The Government has indicated that it plans to legislate to ease the restrictions on changes in the PPF levy from year to year. The PPF has said that it would have considered a zero levy for this year, given the robust funding position of the PPF, but cannot do so because it would then not be able to increase it again, given it is currently prevented from making annual increases of more than 25% in the levy. Ministers have been clear that they will address this issue. 

Separately, the previous government indicated that it had decided in principle that the PPF would take on a role of a ‘public sector consolidator’ of smaller DB schemes, but the new government so far seems less committed. In May 2025 the Government said that “We continue to explore whether a small, focused Government Consolidator, run by the PPF, could be an option for schemes less attractive to commercial providers”. This suggests that measures on this proposal are unlikely in the Pension Schemes Bill. 

There has also been much discussion recently of potential improvements in the compensation offered by the PPF and the Financial Assistance Scheme (FAS), given the robust financial position of the PPF. A particular focus has been on potentially providing some indexation on pre-97 service. However, the Government’s May 2025 response to the DWP Select Committee was more guarded, noting that “any use of the PPF reserve and increases in future liabilities have an impact on the public finances”. However, the DWP continues to look at this issue “to ensure a balance can be struck between all parties”. This includes in relation to potentially introducing pre-97 increases for the FAS (although removing the FAS compensation cap is off the table). The Government promises to provide further detail in due course. 

Finally, the King’s Speech said that the ability of the PPF and FAS to make terminal illness payments would be extended through the Bill, though since then this has been proceeding through a Private Member’s Bill. 

In summary, the forthcoming Pension Schemes Bill is set to be a ‘blockbuster’, crammed to bursting with measures affecting everything from the largest DB schemes to micro DC pots created through automatic enrolment. We will be posting updates on the Bill and its measures on this page.