Pensions Bulletin 2025/13

Pensions Regulator responds further to Government desire to reform the UK’s regulatory system 

Nausicaa Delfas, the Pensions Regulator’s Chief Executive, said, in a press release issued on 28 March 2025, that the Regulator will help boost economic growth by (amongst other things) reducing the regulatory burden and enabling access to a broader range of diverse assets. She went on to say that the retirement savings market also needs to respond and continue to innovate with new product offers, greater transparency and genuine value for money offerings. 

This press release follows a speech she gave the same day, in which she also emphasised that diverse assets can improve outcomes for savers and generate growth for the UK economy, and these could be mutually reinforcing rather than in conflict. 

A separate letter responding to the Government's action plan to overhaul the regulatory system (see Pensions Bulletin 2025/11) was also published, in which several commitments were given in five key areas: 

• Increasing the value of pension funds  
• Enabling productive investment  
• Reducing unnecessary regulatory burden and releasing funds for investment  
• Driving growth through data and digital enablement  
• Supporting market innovation 

These largely provide further detail to the pledges made by the Regulator within the Government’s action plan. In a further section of this letter the Regulator calls on the Government to assist it in several areas, most notably: 

• Removing unnecessary legislation – with a specific ask that the requirement for the Regulator to issue a fine whenever a (DC) pension scheme fails to publish its Chair’s Statement on time is repealed as it is no longer required to drive desired behaviours. Presumably, this could be taken forward in the Pension Schemes Bill. 
• Creating delegated rule-making – which would appear to be akin to the powers enjoyed by the Financial Conduct Authority. This has been requested before by the Regulator. No specific examples are given in the letter of where the Regulator would like to have such powers. 

HMRC’s Newsletter 168 

HMRC’s Pension Schemes Newsletter 168 published on 27 March 2025 contains four topics, three of which serve as reminders on issues already communicated. 

• Pension scheme returns – those notified of a need to file a pension scheme return for the 2024/25 tax year are reminded that they will need to submit this on the Managing pension schemes service (and for future tax years). Further details are provided in relation to such returns, firstly for those who have yet to migrate to the new service and secondly on how to complete these returns on the new service. The old Pension Schemes online service should be used for 2023/24 and earlier tax years.
• Drawdown tables – attention is drawn to new tables for capped drawdown pension funds to work out the basis amount for calculating the maximum income that can be taken. These new tables apply from 1 September 2025, replacing the current tables that have been in force since 2017.
• QROPS – HMRC reminds its readers that in April 2025 it will be writing to scheme managers of QROPS in the European Economic Area (EEA) asking them to confirm that they meet conditions that must be met by schemes established in the rest of the world (following changes made by the now Finance Act 2025 – see Pensions Bulletin 2024/44). Such schemes have until 7 May 2025 to give an affirmative response, failing which they will be removed from the notification list when it is updated by 15 May 2025.
• Lifetime allowance protections and enhancements – another reminder is given of the deadlines, set by the Finance Act 2024, to apply for certain lifetime allowance protections and enhancements, that will expire by 5 April 2025. There is also a reminder that in 2025 the lifetime allowance protection look-up service, of use to pension scheme administrators, will be moved onto the Managing pension schemes service.

IFS proposes reforms to help individuals make good use of their DC pension wealth throughout their retirement 

In the latest contribution to its pensions review, the Institute for Fiscal Studies is suggesting that some reforms are needed to address the risk that many could exhaust their private resources and fall back purely on state pensions and benefits, especially later in retirement. The IFS then focuses on default retirement income solutions which it is expected that DC occupational pension scheme trustees will have to make available to their members because of provisions in the forthcoming Pension Schemes Bill. 

The IFS suggests that a hybrid retirement income solution in which, by default, people are able draw down on their pension wealth flexibly earlier in retirement, but annuitise their pension savings at older ages (e.g. at 75 or 80), would work well. However, such a ‘flex then fix’ model would not be right for everyone and therefore this default should be ‘soft’ with a menu of alternative options provided to make it easy for people to choose other sensible options. 

To support these conclusions the IFS has published a report that examines the decisions that older individuals face as they draw on and manage their private pension wealth through retirement alongside another report on suggested policies to help people appropriately manage their DC pension wealth through later life. These suggestions include: 

• Encouraging DC pot consolidation so that individuals should typically end up with one, or a small number of, DC pension pots to manage at retirement; 
• Steadily increase the age at which individuals are first able to access their DC pension pots, as pension saving is ultimately designed to provide financial resources in retirement – not lump sums whilst still working; 
• No longer describe the tax benefits of private pensions in a way that accidentally encourages individuals to withdraw large amounts from their pension pots early in retirement, such as to access the ‘tax-free lump sum’. 

Pension Protection Fund reaches its 20th birthday 

The Pension Protection Fund has marked 20 years having passed since it came into being on 6 April 2005 by listing its key achievements and milestones over this period. It now provides compensation for over 430,000 people (spread across the PPF and FAS) having taken under its wing over 2,000 DB schemes. 

At the same time and in an interview with the Financial Times, Chief Executive Michelle Ostermann said that if the Government expands its remit to allow it to consolidate the UK's DB sector, it would increase its current allocation to UK productive finance investments of around 7.5%, so that some 10% of the PPF’s assets would be held in this way. The FT also revealed that the PPF is in discussions with lawmakers about increasing the compensation it pays to its 300,000 PPF members, reflecting the substantial surplus that it now holds. 

FCA floats the idea of using pension savings for house deposits

In a speech given by Nikhil Rathi, Chief Executive of the Financial Conduct Authority on 28 March 2025, the possibility of using pension savings to help put a deposit down for a home was suggested, as part of “bold ideas for a joined-up future”. 

Mr Rathi pointed to Australia, New Zealand, the United States, Singapore and South Africa which he said all permit their citizens to leverage their pension savings to buy a first home. He went on to say that If pensions, mortgages and savings continue to be treated as separate tracks, opportunities will be missed to help consumers get where they need to be.   

Answers to Parliamentary Questions 

There have been a number of answers to pensions-related questions given by ministers recently. These include the following. 

• Inheritance tax on pension funds – in response to a question by Sarah Olney MP about the timetable for implementing the Government’s proposals to apply inheritance tax to unused pension funds, James Murray, Exchequer Secretary at HM Treasury, re-iterated the original timetable – the Government to publish a response document and draft legislation for these changes later in 2025 and the law to operate from 6 April 2027. 
• Pension adequacy – in response to a question by Peter Bedford MP about a review of pension adequacy, Pensions Minister Torsten Bell acknowledged the importance of the issue and said that the second phase of the pensions review will in due course look at further steps to improve pension outcomes, and pension adequacy for all. However, we at LCP note that this second phase was delayed by the Government and there are currently no public timings for it to commence. 
• Pension Protection Fund – in response to a question by Peter Bedford about reform of the PPF, Torsten Bell said that in addition to the end of life special rules (that had been announced in the King’s Speech, but which currently are set out in a Private Member’s Bill), the Government will continue to consider whether there are further opportunities for change in the pensions compensation system (see PPF article above). In a separate question from Peter Bedford Torsten Bell said that the Government will set out more detail in due course as to the greater flexibility it is considering giving to the PPF Board in setting the PPF levy.   
• Economic Activity of Public Bodies (Overseas Matters) Bill – in response to a question by Kevin Hollinrake MP about whether this Bill, which provides that investment decisions made by local government pension schemes cannot be influenced by political or moral disapproval of foreign state conduct (see Pensions Bulletin 2023/26) that was lost as a result of the July 2024 General Election will be re-introduced, Alex Norris, Under-Secretary at the Department for  Housing, Communities and Local Government said that the Government will not be reintroducing the Bill. 

Finally, on Virgin Media, Tosten Bell has reprised an earlier answer, this time saying to Peter Bedford that “We are actively considering our next steps”.