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 Pension Schemes Bill continues to be scrutinised by the House of Lords Committee, with a further committee date scheduled for 23 February 2026. The committee has now agreed on the majority of clauses in the bill. Clauses 40 and 41 dealing with asset scale and allocation were debated heavily, particularly in relation to the government’s “reserve mandation power”, but eventually these clauses were agreed without amendment. An amendment that had been proposed affecting clauses 100 to 107, which implements the Virgin Media remedy, was withdrawn. As currently drafted, certain schemes are carved out of the remedy if, broadly, legal proceedings have already commenced in relation to the validity of an amendment. The proposed amendment would have deleted this carve out, but it was not taken forward. Clauses relating to pre-1997 indexation for compensation paid out of the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) were also the subject of much debate. The clauses provide for pre-1997 indexation from January 2027 for PPF and FAS members who were in schemes that provided pre-1997 indexation, or who were in schemes where it is not known whether pre-1997 indexation was provided. The clauses operate prospectively only and do not provide for compensation in respect of arrears of pension that members would have received had pre-1997 indexation always applied. Once the committee has finished with the bill it will report back to the House of Lords on any amendments, and the bill will then have its third reading in the House of Lords. In spite of clear recent attempts to progress this bill quickly, it is still not clear when royal assent will be received.
The National Insurance Contributions (Employer Pensions Contributions) Bill is also making its way through Parliament. This is the bill that introduces a £2,000 cap from April 2029 on pension contributions made by way of salary sacrifice, so that any contributions above this level are treated as normal employee contributions and subject to employer and employee national insurance contributions (NIC). Ordinary employer contributions will remain exempt from NIC. The bill started in the House of Commons and has now had its second reading in the House of Lords. A committee of the House of Lords will scrutinise the bill on 24 February 2026. Meanwhile, the Office for Budget Responsibility (OBR) has produced a report setting out further information in relation to the costings of the policy announced at Budget 2025, concluding that the modelled responses to the cap would reduce the static yield to HM Revenue and Customs (HMRC) by around 48% in 2030-2031. The report notes that “the behavioural response to the measure is highly uncertain, given the various channels through which employers and employees can respond”. It notes that behavioural responses might include employers curbing future pay rises and instead awarding increased employer pension contributions, employees switching to relief at source schemes, employees front loading salary sacrifice contributions before 2029, employees reducing their defined contribution pension contributions to receive a higher salary and the employer adjusting to increased NIC costs by reducing ordinary employer contributions and/or paying lower salaries and bonuses (effectively passing on the additional costs to the workforce). Many of these responses could impact employees across the board, unless employers are able to identify those impacted by the cap and manage an increasingly complex payroll system.
An order creating a new specified regulated activity of providing targeted support has been laid before Parliament. The order will come into force fully on 6 April 2026, but the Financial Conduct Authority (FCA) will have certain powers from 23 February 2026, to make rules and grant permissions relating to carrying out targeted support. Our 18 December 2025 weekly update contains more information on targeted support.
A recent “employment law special” publication from our restructuring and insolvency colleagues looks at the Employment Rights Act 2025 from an insolvency perspective, and includes a number of helpful links for further information.
If you would like specific advice on any of these issues or anything else, please contact a member of our Pensions team.
