Pensions Bulletin 2025/11

Government to overhaul the UK’s regulatory system

On 17 March 2025 the Government announced a three-point action plan to reform the UK’s regulatory system to support its new Industrial Strategy and wider growth mission. The Chancellor also made a statement to the House of Commons.

The policy paper containing this action plan points to issues that stifle growth in the UK, including regulations that are too complex and duplicative, lacking in certainty and predictability, and regulators that are too risk averse. The paper also sets out a vision for the regulatory system – it is to support growth, be targeted and proportionate, be transparent and predictable and adapt to keep pace with innovation.

The Government’s action plan sets out the next steps which are:

1. Tackle complexity and the burden of regulation – by cutting administrative costs for business by 25% by the end of this Parliament, removing or consolidating regulators, and removing duplication and streamlining processes.
2. Reduce uncertainty across the regulatory system – by clarifying each regulator’s roles, approaches and processes, and strengthening transparency. Mentioned under this heading is a new review of the Financial Ombudsman Service (FOS) which is expected to conclude by the summer, with legislation following as necessary “to ensure that we have a dispute resolution system in the UK which is fit for a modern economy”. There is also mention of work being undertaken with the leadership of the Competition and Markets Authority “to ensure its activities are pacy, predictable and proportionate for businesses and investors”.
3. Challenge and shift excessive risk aversion in the system – by strengthening regulators’ model of accountability and formalising performance reviews. The Regulatory Innovation Office, which was set up in October 2024, is tasked to address regulatory barriers that are holding back innovation and to drive wider change in regulators’ behaviour and attitudes towards innovation.

Set out in an annex are a set of pledges from key regulators, including the Pensions Regulator, which the policy paper says will both have a tangible effect on driving growth and investment and are implementable within the next 12 months.

The Pensions Regulator has pledged to:

• Review the amount of capital reserving that Master Trusts are required to hold, with a view to safely freeing up millions of pounds for schemes by the end of 2025/26;
• Develop an innovation framework and criteria to trial pensions innovation ideas and launch a hub to test a variety of innovation services with the market by the autumn of 2025 (as previously announced – see Pensions Bulletin 2024/40);
• Reduce unnecessary regulatory burdens and improve data and data-sharing by (a) over the course of 2025/26 monitoring the quality and value of regulatory interaction with schemes and employers and make sure that new interventions are efficient and effective, and (b) reviewing its scheme return and supervisory return data collection requirements by the end of March 2026 to identify options to reduce unnecessary burdens on schemes; and
• Encourage consolidation and consideration of investment in productive assets by driving consolidation and encouraging the voluntary disclosure of asset allocation data, as well as the Value for Money framework.

When is a payment from a pension scheme a lump sum for DTA purposes?

New HMRC internal guidance INTM163160 published on 10 March 2025 tackles this issue in the context of those resident abroad taking benefits from a UK registered pension scheme, examining how the UK’s Double Tax Agreements (DTAs) could affect the issue. DTAs are of importance for those taking UK retirement benefits whilst resident abroad as without them there is a risk that the individual could be taxed in relation to the payment in both jurisdictions, or that the tax-free lump sum to which a UK resident would be entitled to is taxed in the other jurisdiction. Assuming a DTA is in place, the issue then turns to what this says, typically in its pensions article.

HMRC says that for most of the UK’s DTAs whether a payment is a lump sum will not have a material effect since lump sums and non-lump sums will be treated the same way in the relevant DTA. However, a small number of the UK’s DTAs include a specific provision that creates a different taxing right for lump sum payments.

The guidance then turns to payments that may need to be treated as a lump sum and is of particular relevance to those drawing down on DC retirement pots in an irregular fashion, where there can be some uncertainty as to whether they are receiving pension income or a lump sum. The guidance lists some considerations to be taken into account and suggests that where all, or the majority of payments are ad hoc of irregular amounts, it is likely that each will be a lump sum for the purposes of a DTA. 

Pensions dashboards standards published 

We reported last week the Pensions Dashboard Programme’s announcement that standards for pension providers and schemes had been approved by the Secretary of State for Work and Pensions (see Pensions Bulletin 2025/10). However, at the time these finalised standards had not been published. They now have and can be accessed from the PDP’s Standards webpage.

Those approved comprise data standards, technical standards, the code of connection and reporting standards. The design standards, which are relevant only to firms operating their own dashboard, as a qualifying pensions dashboard service, have yet to be finalised.