Pensions Bulletin 2025/14

President Trump’s tariffs and UK pensions 

President Trump’s announcement last week of extensive tariffs on imports of goods to the USA rocked investment markets across the world with widespread sell offs of equities over several days, in a process that may have some time to run before we reach a new normal. Market reaction to his 2 April 2025 “liberation day” also potentially signalled expectations of increased inflation risk, slower economic growth and increased odds of a recession, particularly in the USA. 

But what is the impact for pensions and pension savers? On this, the Pensions Regulator has been silent so far, but may choose to address it in, for example, its annual funding statement for DB schemes which we understand is due towards the end of this month. Pre-2 April 2025 measures of covenant strength may need to be reconsidered in some cases; as it stands, the impact of President Trump’s tariffs on the UK is set to be very sector dependent. Affordability of recovery plans may need to be rethought. All DB schemes, including those comfortably in surplus on pre-2 April 2025 measures will want to know how their funding position has changed as a result of the recent market turbulence. Those targeting buyout will want to know whether they are still on track. 

Longer term, President Trump’s tariff decisions have the potential to bring material change to the global order in a way that could have significant consequences for investment strategies and how they are best implemented but now may not be the time for wholesale strategy changes. There will also be new investment opportunities to consider, on which schemes should seek investment advice. For any who feel they have “missed the boat” and not taken the opportunity to reduce risk at pre-tariff market levels, contingency planning can help to ensure future opportunities are captured. 

For DC savers there are similar considerations with younger members likely to have investment strategies heavily exposed to the US market, driven by market-cap weighted equity allocations which have delivered strong returns in recent years. Those approaching retirement may be particularly concerned, with news of current investment market downturns and volatility hitting the headlines likely to create uncertainty around their retirement planning, particularly those looking to remain invested and draw down on their savings. It is important to reassure members who may make decisions which could cause more harm than good – hopefully an opportunity to seek guidance and advice.  

DC providers may have to think about warnings when preparing 31 March year end benefit statements as they may flatter the true position when the individual receives their statement – both in value and in short- to medium-term return expectations.  

Pensions Regulator to extend oversight to professional trustee firms 

In a wide-ranging speech delivered to the TUC’s Pension Conference on 2 April 2025, Nausicaa Delfas, CEO of the Pensions Regulator, announced that from this summer, the Pensions Regulator will extend its supervision “to build formal relationships with the largest professional trustee firms”. This will initially be through a pilot but will be extended to the rest of the professional trustee market by the end of the year. 

She said that the Regulator had used the last six months taking a closer look at the largest professional trustee firms, probing a number of areas of their operation with the aim of ensuing that they are operating in a way that is consistent with the needs of pensions savers. Five key areas were mentioned – ownership structure, skills and experience, knowledge and understanding, diversity, equality and inclusion, conflicts of interests and fees. 

A press release publicised this aspect of her speech and also mentioned a market oversight report setting out what the Regulator had learned so far through its engagement with professional trustees, and how this will shape its future focus for the sector. Amongst the Regulator’s next steps are consideration of how it may use its existing powers to mitigate identified material risks where firms do not meet its expectations. 

PPF publishes its 2025-28 strategic plan 

The Pension Protection Fund has set out its key strategic priorities for the next three years in its latest strategy document. Divided into four areas – act in the interests of those it protects, adapt and evolve, build on its strong foundations, and help shape positive change in the pensions industry – it is perhaps those in the first area that are of immediate interest. They include working with the Government to: 

• Reduce costs for schemes and employers by revising the legislation governing its external funding, including by (a) creating a framework that allows for a zero levy but also enables the levy to be reintroduced if it becomes necessary, and (b) considering the necessary changes to the PPF administration levy in line with the recommendation that it be abolished. 
• Enable PPF and FAS compensation data to be available to members on pensions dashboards as soon as possible. 
• Progress a review of indexation of compensation, recognising in particular the need to consider changes to pre-97 indexation levels, as recommended by the then Work and Pensions Select Committee in March 2024 and on which the Committee has recently written to the Pensions Minister and received a response.

Also under this heading the PPF wants to finalise all known applications to the Fraud Compensation Fund and work with the DWP and the Pensions Regulator to review and establish whether any future claims on the Fund are likely. 

Under “help shape positive change in the pensions industry” there is a mention of the possibility of the PPF being used as a consolidator for schemes with solvent employers – a subject on which a Government decision is awaited.  

More fines for small DC schemes failing to complete value for money assessment 

The Pensions Regulator has announced that it has fined a number of smaller DC pension schemes for failures in relation to the more detailed value for money assessment that they need to undertake, urging small DC schemes failing to compete with better governed larger ones to consider winding up. 

For scheme years ending after 31 December 2021 trustees of schemes with DC assets and total assets of less than £100m, and that have been operating for at least three years, are required to demonstrate that they are providing value for their members and to report on this in their annual Chair's Statement and to the Pensions Regulator.   

Following research showing that only 17% of such schemes had completed these assessments, the Regulator launched a large-scale regulatory exercise to ensure compliance with this requirement. 

The Regulator’s latest compliance and enforcement bulletin shows that the Regulator used its powers in relation to these assessments on 18 occasions between July and December 2024. This compares with seven occasions between January and June 2024 and two prior to this, resulting in a running total of 27. The Regulator says that since it launched its initiative it has issued penalties to 19 schemes with an overall total in fines of £97,750. 

Freedom and choice survey reveals a number of worries 

The Institute and Faculty of Actuaries has reprised a 2016 and 2022 survey on public attitudes to pension freedoms, to mark the tenth anniversary of their implementation on 6 April 2015. 

This reveals that compared to the 2022 survey: 

• less people are taking advice or guidance before accessing their pensions; 
• more people are worried about running out of money in retirement and more have a lack of understanding of the options available; 
• less people believe that their normal regular expenditure in retirement is being met or is expected to be met by their pension; 
• more people who have accessed their pension have taken their tax-free lump sum; and 
• more people showed a lack of understanding of the charges within pension products. 

As a result, the IFoA remains concerned that many UK households are not saving enough for later life, are not accessing free guidance or paid-for financial advice and remain ill-equipped to deal with the risk of running out of money in retirement. 

New rates of state pension start to be paid 

The Government has publicised the increased state pension that will be paid from 7 April 2025, as a result of its annual review, in a press release that talks also to increases to working age benefits and to the national minimum wage that occur at this time of year. 

As we have previously reported, those receiving the full basic State Pension will see their weekly payments rise from £169.50 to £176.45 per week, whilst those receiving the full new State Pension will see their weekly payments rise from £221.20 to £230.25 per week – both increases being driven this year by the 4.1% earnings component of the triple lock. Full details of changes to benefit and pension rates are set out in a policy paper published in November 2024.