HL UK Pensions Law Digest 21 May 2026

Welcome to our latest update, in which we cover: 

Pensions Regulator (TPR): AI plan

• TPR sets out its initial expectations on use of artificial intelligence (AI);

Pensions Regulator (TPR): uses contribution notice power

• TPR has published a regulatory intervention report covering its decision to issue contribution notices to four individuals;

Inheritance tax (IHT) on pensions: draft regulations

• HMRC is consulting on detailed requirements for sharing information between pension scheme administrators, beneficiaries and a member’s personal representatives;

Pensions Commission: Interim Report

• The Pensions Commission’s Interim Report highlights significant undersaving for retirement.

Pensions Regulator: use of AI in workplace pensions

On 20 May, the Pensions Regulator (TPR) published its AI plan, explaining its initial expectations for how trustees should govern the use of artificial intelligence (AI).

TPR plans to issue detailed guidance later in 2026, and to issue a call for input from the pensions industry this Summer.

TPR comments that use of AI is already widespread in large parts of the pensions industry. Current beneficial use of AI includes: enabling personalised support about retirement options or modelling; developing timely and targeted communications; automation of routine tasks; improved detection of fraud; and enabling more proactive detection of risks through analysis of large datasets. Emerging risks associated with AI use include: members turning to AI for financial planning and advice; enabling increased and more sophisticated cyber-attacks; AI-generated scams and fraud; and risk of bias which could widen existing inequalities.

TPR’s expectations of trustees, administrators and managers

TPR reminds trustees that they remain accountable for decisions and outcomes, even where activities are delegated. TPR expects trustees to:

• Understand where and how AI is being used by or on behalf of their scheme;
• Establish clear governance and accountability for use of AI;
• Satisfy themselves that their administrators, advisers and service providers have adopted similarly robust governance arrangements;
• Carry out rigorous testing, assurance and ongoing monitoring;
• Identify and evaluate risks, adopt appropriate risk controls and review these regularly;
• Be aware of AI-driven fraud and respond appropriately to protect members; and
• Seek appropriate professional advice when considering or implementing innovations, and discuss new business models or commercial opportunities with TPR.

In relation to data, TPR expects trustees to:

• Ensure high quality scheme and member data, have a clear data strategy and challenge providers where standards are not met;
• Comply with data protection legislation and guidance, including in relation to automated decision making and use of information in AI systems; and
• Understand how AI models use and process data and ensure robust controls are in place, consistent with TPR’s cybersecurity guidance.

In addition, TPR recommends that trustees, administrators and providers should:

• Invest appropriate time and resources in understanding AI technologies, responsible uses, risks and limitations;
• Be transparent about AI use;
• Stay informed about UK government guidance, developing standards and best practice; and
• Share experiences with TPR and the wider industry to aid development of good practice.

TPR’s own workplan

TPR will focus on four areas to support the safe adoption of AI in its regulatory function:

• Ensuring good governance of all schemes: including cooperation with government and the pension industry to strengthen trusteeship and governance standards; and working with the Financial Conduct Authority (FCA) to ensure regulatory alignment;
• Putting data building blocks in place for effective adoption of AI: including continued engagement with schemes on data quality controls; and ensuring TPR’s online content is high quality and readily usable by AI models;
• Supporting and fostering responsible innovation: including through TPR’s innovation service; and work with the FCA, government and industry; and
• Harnessing AI to become a more efficient and effective regulator: TPR flags that it has used an AI-enabled process to assess over 2,000 websites for potential scam risk, enabling the removal of 29 high-risk sites.

TPR plans to report annually on its progress in enabling safe and responsible AI-driven innovation in pensions.

The Pensions Regulator publishes a regulatory intervention report after issuing contribution notices

The Pensions Regulator (TPR) has published a regulatory intervention report outlining the actions it took against four individuals who benefitted from funds extracted from Discovery Flexibles Limited (DFL), the sponsoring employer of the Danapak Flexibles Retirement Benefits Scheme (the Scheme) – a defined benefit pension scheme, with 209 members as at 31 March 2024.

The case is an example of TPR using its contribution notice powers against individuals, where there has been material detriment to a scheme – and a rare example of the imposition of a contribution notice where the employer is solvent and continues to trade. It is also notable that three of the contribution notices were issued initially on a joint and several basis.

Background

The case involved various transactions between a network of family-owned companies and family members.

In summary, Chris Wrigley (CW), who was a director and co-owner of DFL's holding company (Discovery Flexibles Holdings Limited (DFH)), extracted around £3 million from DFL over a period of several years, despite the Scheme being in substantial deficit throughout the relevant period.

From March 2016, DFH was owned by CW and his wife. CW was also the sole director of DFL, and a trustee of the Scheme until 7 December 2017.

Acts within scope of TPR action

TPR identified four "acts" which it considered led to significant value being extracted from DFL, and which were detrimental to the Scheme:

• Monthly payments from DFL to CW and his wife, ranging from £20,000 to £23,000, and accounted for as dividends and management charges. These payments started in 2008, but the maximum statutory lookback period for contribution notices (six years from the date a warning notice is issued) meant that TPR could only consider payments since 16 September 2015 as being part of the "detrimental act".
• DFH company shares bought using money from DFL. CW drew down £800,000 from DFL's invoice discounting facility and ultimately used this money to buy-out the shareholdings of DFH's other shareholders (other members of the Wrigley family). The purchase was made via a company, Pink Printers Limited (Pink), also owned by the Wrigley family.
• CW directed Pink to transfer all its assets to another company owned by CW, before selling Pink to DFL. By the time of the sale, Pink was "effectively worthless".
• DFL provided financial support to other companies owned by CW despite its poor financial position and the known Scheme deficit.

On 16 September 2021, TPR issued warning notices to CW, his wife and two other individual Wrigley family members who had sold their DFH shares to CW. The warning notices sought four contribution notices; three on a joint and several basis with CW, who TPR maintained was the "primary architect" of the acts.

Outcome

TPR agreed a settlement with CW and his wife. As part of the agreement, they will pay a total of £2 million into the scheme. The final payment is due by 30 October 2028.

The Determinations Panel considered the position of the remaining two targets, who TPR asserted had been involved in one of the detrimental acts (specifically, selling their DFH shares to Pink/CW). The Panel issued a contribution notice to each of them on a sole liability basis for £180,218.50, plus interest. Amongst the factors taken into account by the Panel was the conduct of the targets in "involving themselves" in the DFH share sale and the level of liability it was reasonable to impose given that the individuals may have expected to recover some monies from CW when liability was assessed on a joint and several basis. In light of these factors, the Panel concluded that it would be reasonable to require the individuals to pay 50% of the sum received by them on the sale of their DFH shares.

Appeal

One of the two individuals accepted the contribution notice, including the interest adjustment. However, the other (AP) challenged the contribution notice in the Upper Tribunal. AP's arguments included that:

• Being a "mere beneficiary" of the proceeds from the DFH share sale did not make her a party to the detrimental act of value extraction;
• The £800,000 drawdown transferred from DFL to Pink was not materially detrimental to the scheme, because the loan could have been repaid, so the funds remained recoverable by DFL; and
• Although she was a director of DFL, she was not involved in company decisions and was a “paper only" director.

The Upper Tribunal rejected AP's arguments. In addition, the Tribunal concluded that the Determinations Panel’s decision to use sole liability rather than joint and several (due to the earlier settlement) as a framework for determining what was a reasonable sum, did not justify reducing the amount of the contribution notice. The Upper Tribunal noted that there would have been no guarantee that AP would have been able to recover 50% of the liability from CW. It therefore found that the amount of the contribution notice should be the value of the benefits she received.

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Inheritance tax on pensions: draft information-sharing regulations

HMRC has issued draft regulations for consultation, intended to ensure that necessary information is shared between HMRC, pension scheme administrators (PSAs), and the deceased member’s personal representatives (PRs), following the application of inheritance tax (IHT) to certain pension scheme death benefits for deaths on or after 6 April 2027.

Consultation closes on 11 June 2026.

Additional requirements made by the draft regulations include the following.

Value of death benefits

• PSAs must provide a member’s PRs with prescribed information, including the value of any notional pension property (death benefits which may be subject to IHT), within 28 days of the PRs’ request.
  • If the PSA initially provides an estimated value, it must provide the PR with the actual value within 14 days of ascertaining this.
• The PSA must inform the PRs of how any notional pension property will be split between exempt beneficiaries (such as a surviving spouse or civil partner) and non-exempt beneficiaries, within 28 days of the PRs’ request or, if later, within 14 days of determining the beneficiaries under the scheme rules.

Withholding notices

• The member’s PRs (or someone who has reason to believe they will become the member’s PR) may give a withholding notice to the PSA, requiring the PSA to withhold 50% of a beneficiary’s entitlement to certain benefits for up to 15 months from the member’s death.
• The PSA will be required to give specified information to the person giving the notice and (if the notice is valid) to the beneficiaries affected, within 14 days of receiving the notice.
• Where a valid withholding notice is in place and the rights in respect of the deceased member are transferred to another scheme in a block transfer, the PSA must inform the person who gave the withholding notice within 14 days of the transfer.

Direct payment notices

• PRs or beneficiaries may give notice requiring the PSA to pay IHT (and any interest) direct to HMRC. The PSA may then adjust beneficiaries’ benefit entitlements accordingly.
• The draft regulations set out information which the PSA must provide to PRs and beneficiaries, within 14 days of making the direct payment to HMRC.

Payment of benefits which are not subject to IHT

• Payment of a “death in service payment” will become a reportable event.
  • A payment will be a death in service payment for this purpose if it meets the conditions for exemption from IHT (broadly, that it is payable only in a respect of a member who was in employment or other work of a particular description immediately before death).
  • An event report must be submitted to HMRC within 30 days of the end of the quarter in which the death in service payment is made.
• Where the PRs are required to file an IHT account with HMRC, they may request information from the PSA about any “excluded benefits” which have been (or will be) paid in respect of the member.
  • Excluded benefits means any of the following: a dependants’ scheme pension; a trivial commutation lump sum death benefit derived from dependants’ scheme pension; a nominees’ or dependants’ annuity bought together with a lifetime annuity for the member; or a death in service payment.
  • The PSA must supply the information within 28 days of receiving the request or, if later, within 14 days of determining the beneficiaries under the scheme rules.

Benefits provided by an insurer

• Similar information-sharing requirements will apply to an insurer which has paid a lifetime annuity or scheme pension to the member.
• As currently drafted, the requirements would not seem to apply where the member had a deferred annuity with an insurer. This may be a drafting oversight which will be corrected in the final regulations.

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Pensions Commission: Interim Report

The Second Pensions Commission has issued an Interim Report, Pensions 2050: Evidence and Future Priorities.

The Commission is made up of Baroness Jeannie Drake, Sir Ian Cheshire and Professor Nick Pearce and its final report is expected in Spring 2027.

As a reminder, the DWP relaunched the Pensions Commission in July 2025, with a remit to make recommendations for achieving a strong, fair and sustainable pensions landscape in the UK. The recommendations of the original Commission’s final report in 2005 led to: the introduction of auto-enrolment; reforms to State Pension; and increasing State Pension age to reflect increases in life expectancy.

When considering retirement outcomes, the Interim Report has found the following.

• 15 million people (four in 10) are not saving enough to meet the aspirational target replacement rate set out by the original Pensions Commission.
• Five million people (over one in 10) are set to miss the “minimum” standard retirement income calculated by Pensions UK. Three in four people are projected to miss Pensions UK’s “moderate” standard retirement income.
• 15% of Generation X (born 1965-1980) are expected to miss the Pensions UK minimum standard, compared to 10% of Generation Z (born 1997-2012).
• Auto-enrolment (AE) minimum contributions will not be sufficient to provide adequate retirement incomes for many people. However, voluntary saving rates above auto-enrolment minima are low.
• The self-employed are the group least likely to participate in pension saving. Only 17% of self-employed workers currently save into a pension; for individuals whose earnings are solely from self-employed, this falls to 4%.
• Caring responsibilities and time away from work because of illness or disability, combined with lower incomes, part-time or insecure work mean that women, people with disabilities and some ethnic minorities can accumulate much less pension wealth.
• The large number of people who leave the workforce before State Pension age is a major adequacy risk. A coherent strategy is required to support remaining in work for longer.
• To ensure adequacy, how and when individuals access their pensions is as important as pension saving. Going forward, stronger protections and a default decumulation approach is needed to convert pension pots into sustainable income through retirement.

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Authored by Jill Clucas and Susanne Wilkins.