Pensions Weekly Update – 2 June 2025 | Publications | Insights & Events

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Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes that you might have missed, with links for further information.

The government has published its final report in its pensions investment review, along with its outcome of consultation on the Local Government Pension Scheme (LGPS): Fit for the Future. The final report sets out the conclusions of the pensions investment review, which was launched in July 2024. The final report confirms that legislation to implement reform in relation to the defined contribution (DC) market and the LGPS will be included in the forthcoming Pension Schemes Bill (rumoured in the press to be published this week). Highlights of the final report include:
- All multiemployer DC schemes and LGPS funds will be required to manage at least £25 billion in assets by 2030. This requirement will be set at the arrangement level, such that a provider must have at least one main default arrangement meeting the requirement by 2030. The requirement will apply to multiemployer schemes but not those that are only available to a closed group of employers related through industry or profession, or to default arrangements that serve protected characteristics, such as religion. There will be an easement for schemes that can show they will have at least £10 billion of assets under management in an arrangement by 2030 with a credible plan to scale up to £25 billion by 2035.
- The scale requirements will not apply to collective defined contribution pension schemes.
- The government will legislate to prevent new default arrangements from being created and operated, except in certain circumstances with regulatory approval.
- The value for money (VFM) framework will require underperforming funds to improve, wind up or consolidate into better performing ones, and it will provide comparable metrics that will enable decision-makers to assess performance and see whether it is in savers’ best interests to remain in their current arrangement.
- There will be a power to carry out DC bulk transfers internally from legacy schemes into better performing funds without member consent.
- The Pension Schemes Bill will include a reserve power that would, if necessary, enable the government to set “quantitative baseline targets” for pension schemes to invest in a broader range of private assets, including in the UK.
- The March 2026 deadline for LGPS asset pooling is confirmed.
- All LGPS administering authorities will be required to delegate the implementation of their investment strategy to, and take their principal investment advice from, their pool, and transfer all assets to the management of their pool.
- The LGPS pools are to be established as investment management companies that are authorised and regulated by the Financial Conduct Authority (FCA).
- The government will have power in the Pension Schemes Bill to direct an LGPS administering authority to invest in a specific pool; one reason being to ensure that there are six pools instead of the current eight pools.
- The government will also clarify its power to compulsorily merge LGPS funds, in the event that the pooling requirements are not met.
The LGPS Scheme Advisory Board (SAB) has published a statement, in which it notes that while the government’s response provides welcome clarity on the direction of reform and the commitment to implementing the good governance recommendations made by the SAB in 2021, the scale and pace of the proposed changes carry significant risks if not managed with care. The SAB notes that the current timetable places considerable pressure on funds to balance the reforms with other critical responsibilities. The LGPS is currently dealing with the 2025 triennial valuation, preparation for dashboards and implementing the McCloud remedy.
The government has also published its outcome of consultation on options for defined benefit (DB) schemes. Highlights include:
- The government will introduce, via the Pension Schemes Bill, a statutory resolution power for trustees of schemes to modify their scheme rules to allow extraction of surplus. Use of this power will be at the discretion of the trustees.
- The requirement that trustees must have passed a resolution for surplus extraction contained in Section 251 of the Pensions Act 2004 will be repealed.
- The government will not mandate how surplus is used.
- The government is considering changing the threshold at which trustees are entitled to share surplus with the sponsoring employer from the current buyout threshold to a threshold set at full funding on the low dependency funding basis. Further detail will be set out in draft regulations that will be the subject of consultation.
- The rate of taxation applicable to surplus extracted from DB schemes will remain at 25%.
- The Pensions Regulator (TPR) will develop guidance with respect to DB surplus extraction. The guidance will reference a suite of options open to trustees to bring benefits to members from surplus sharing.
- The government will continue to explore the possibility of the Pension Protection Fund (PPF) acting as a consolidator for schemes that are unattractive to commercial consolidators. Legislation for this will not be included in the forthcoming Pension Schemes Bill.
The Pensions Regulator (TPR) has published its final response to its statement of strategy consultation. The statement of strategy forms part of the new measures relating to DB funding that were set out in the Pension Schemes Act 2021. It outlines the trustees’ approach to funding and risk management and comprises a statement of the trustees’ funding and investment strategy, along with other supplementary matters. TPR has previously published statement of strategy templates, which set out the data that will need to be provided in the final statement of strategy spreadsheet. This spreadsheet will then be submitted to TPR via its new digital service for submitting a scheme valuation, which TPR has also now launched.
Our labour and employment colleagues have produced their quarterly board briefing. This helpful document includes a tracker that aims to provide corporate boards with a guide to key upcoming legal changes, including critical dates, suggested actions and an assessment of any risk/opportunities arising. This quarter, there is a focus on the Employment Rights Bill.