Pensions Bulletin 2025/09

Virgin Media – DWP actively considering its next steps

Pensions Minister Torsten Bell has provided an update on the Virgin Media issue by way of an answer to a Parliamentary Written Question from Liberal Democrat MP John Milne. In it Mr Bell notes the representations made to the DWP by pension schemes and industry representatives and acknowledges that where schemes are unable to demonstrate that the reference scheme test had been met, this ‘“could lead to uncertainty and additional costs”. He concludes by saying that although no final decisions have been made, the DWP is “actively considering” its next steps and will provide an update in due course.

DC landscape report shows consolidation is ramping up and master trusts continue to dominate

The Pensions Regulator's 2024 Occupational Defined Contribution (DC) landscape report reveals a significant consolidation in the UK's DC pensions market (see Pensions Bulletin 2024/20 for last year’s report):

• Decrease in Number of Schemes: The total number of non-micro-DC and hybrid schemes fell by 15% in 2024, dropping to 920—marking the first time this figure has fallen below 1,000. This decline is predominantly attributed to schemes with fewer than 5,000 members. The number of DC and hybrid schemes with over 5,000 memberships stood at 120 in 2024, of which the Regulator regards 51 as being master trusts (They go on to explain that although there are just 33 authorised master trusts, they treat each section of a master trust as a separate scheme, hence arriving at 51). The Regulator notes that since 2015, the total number of non-micro-DC schemes has steadily decreased by an average of 11% per year. Since 2020, the most substantial annual decrease happened in small schemes, with those having 12 to 999 memberships experiencing average yearly declines of 14%. However, there remain more than 24,000 micro-schemes (those with between 2 and 11 members).
• Membership Growth: Total memberships in (non-micro) DC schemes increased by 6%, rising from 28.8 million in 2023 to 30.6 million in 2024, compared to an 11% increase the year before. While active memberships remained steady at 11.1 million, deferred memberships grew by 10%, from 17.7 million to 19.5 million.
• Dominance of Master Trusts: Master trusts now account for 91% of (non-micro) DC and hybrid scheme memberships, encompassing 28 million members. They hold £166 billion in assets, representing 81% of all DC scheme assets.
• Asset Growth: DC scheme assets (excluding micro and hybrid schemes) experienced a 25% increase, growing from £164 billion in 2023 to £205 billion in 2024 (of which £166 billion is reported to be in master trusts). This led to a rise of nearly 17% in assets per member (from £6,100 to £7,100) driven by a combination of contributions and investment returns. DC assets in hybrid schemes amount to £62 billion – this accounts for 23% of total DC assets (£267 billion), including hybrid.

In introducing the report Chief Executive Nausicaa Delfas emphasised that the Regulator believes that larger schemes are “better placed to deliver for savers and drive growth in savers’ interests” going on to say that “where schemes cannot compete with the very best, they should consolidate and exit the market”.

The Pensions Regulator publishes its data strategy

Following on from the digital, data and technology strategy it published last October (see Pensions Bulletin 2024/40) the Pensions Regulator has published a data strategy intended to challenge schemes to “raise standards around data to improve outcomes and benefit the wider market through increased efficiencies, enhanced innovation and reduced regulatory burden”.

The Regulator wants to ensure data is properly joined up, searchable, and provides value (while balancing any potential burdens) allowing savers to easily access information about their pension savings and trust the reliability and accuracy of the data. To do this, it intends to focus on the following three key areas:

• Building strong foundations – by implementing data principles and developing forward-thinking data professionals and open standards for data that will help it more easily collect, analyse, and interpret high-quality data for better decision-making.
• Taking a wider data approach – by improving its data processes and controls and sharing data more efficiently and effectively to reduce the burden on schemes
• Focusing on adding value to saver outcomes

The strategy goes on to list a set of data principles and suggest specific planned initiatives in these three areas.

The Regulator acknowledges that the world of data is such that it demands a flexible, adaptive approach to strategy developments and notes that implementation of elements of its strategy and data ecosystem will therefore develop at different paces. It promises to engage with the industry to get feedback and bring in best practice and innovative ideas and has already invited some of the largest administrators to collaborate in order to “understand how they operate and mitigate systemic risks”. Other cross industry plans include establishing an AI advisory council to oversee the ethical use of AI technologies and setting up a working group with industry experts to help the industry improve its use of digital tools, data and technology.

HMRC’s latest pension tax round up published

HMRC’s Pension schemes newsletter 167 published on 3 March 2025 covers a number of topics, leading with a reminder that from April 2025 pension scheme returns must be filed on the Managing Pension Schemes service (rather than the Pension Schemes Online service as currently) and that more information will also be requested than is currently the case.

This is followed by a discussion around migrating pension schemes to the Managing Pension Schemes service, including the benefits of doing so and details of further planned enhancements around the financial and accounting information that will be made available through the service.

Next follows a section on qualifying overseas pension scheme (QROPS). HMRC firstly states that form APSS263 (which is completed by members to give scheme administrators the information they need to process transfers) has been updated to include the requirement to disclose the member’s available overseas transfer allowance. HMRC then advises that in April 2025, it will be writing to managers of EEA-based QROPS asking them to confirm that their schemes are (a) regulated by a regulator of pension schemes in the country in question and (b) established in a country or territory with which the UK has either a Double Tax Agreement providing for the exchange of information, or a Tax Information Exchange Agreement. This is because from, 6 April 2025, the conditions to be met to be considered a QROPS in the EEA will be the same as for schemes established in the rest of the world – as announced in the 2024 Autumn Budget and being provided for in the Finance Bill (see Pensions Bulletin 2024/44). If HMRC receives no response, or confirmation that the new conditions are not met, the scheme will cease to be a QROPS.

HMRC then provides more information about the process to follow when reporting pension commencement excess lump sum (PCELS) and stand-alone lump sum (SALS) when there is also a continuing source of regular pension income. The main point to note here is that when administrators report either a PCELS or SALS through Real Time Information (RTI) they should set up a separate payroll record to the one being used to report any regular ongoing source of pension income to prevent any potential adverse impact on a customer’s tax record. Other requirements are also set out.

The Newsletter also confirms that HMRC will now permanently accept scanned relief at source forms as an alternative to wet signatures if either emailed by the authorised signatory or signed and emailed by someone else providing they also receive a separate email directly from the authorised signatory authorising them to submit the form.

The Newsletter concludes with the news that the digital relief at source service will not now be operative until April 2028 at the earliest to “allow more time to deliver an ambitious programme of government reform”. This is a further delay to the digitisation which was originally intended to operate from 6 April 2025, but subsequently delayed to April 2027 (see Pensions Bulletin 2023/49).

Record pension credit applications and awards following winter fuel allowance announcement

The Department for Work and Pensions has announced that there have been a record high number of claims for Pension Credit, with DWP also processing them at a record high level. Comparing the period since the 29 July 2024 announcement that winter fuel payments will be means tested (see Pensions Bulletin 2024/29) with the comparable 2023 to 2024 period, DWP has:

• Received 235,000 Pension Credit claims – an 81% increase or 105,100 extra applications on 2023 to 2024;
• Cleared 232,200 Pension Credit claims – a 92% increase or 111,100 extra clearances on 2023 to 2024, of which, 117,800 claims have been awarded, a 64% increase or 45,800 extra awards on 2023 to 2024.

Details are set out in this statistical release.

MP queries QROPS as pension fraud vehicle 

Labour MP Anna Gelderd tabled six parliamentary questions recently relating to qualifying recognised overseas pension schemes (QROPS) and their potential use as a conduit for fraud to the detriment of pension savers.

However, in response, Emma Reynolds, Economic Secretary to the Treasury said that there were no plans to make HMRC, or the Pensions Regulator, or the Financial Conduct Authority, regulate QROPS, and this would not be possible in any event given that the schemes are based overseas. There are also no plans to introduce an investigation unit into QROPS or review the regulatory framework. She pointed to the need for UK individuals to get financial advice when transferring large amounts of pension savings and the need for pension scheme administrators to carry out due diligence on transfers to other pension schemes.