HL UK Pensions Law Digest 6 February 2026

Pension Schemes Bill: Committee in the House of Lords

• Points of interest concerning: defined contribution (DC) scale and asset allocation; fiduciary duties; small pots; and guided retirement;

Government intends to consult on enhanced transfer protections

• In a written Parliamentary answer, the Pensions Minister states that the Government intends to consult on strengthening transfer protections;

HMRC Pensions Newsletter 177

• A reminder for non-UK resident administrators, plus an invitation to participate in development of digital reporting for the inheritance tax (IHT) reforms;

Pensions Dashboards Programme (PDP): consultation on updated reporting standards

• The PDP has published a consultation on proposals to update its reporting standards;

Pensions Administration Standards Association (PASA): guidance on navigating buy-ins and superfund transfers

• PASA has published guidance for trustees, administrators and advisers navigating buy-ins and superfund transfers.

Pension Schemes Bill: committee stage in the Lords

The Pension Schemes Bill continues to be considered by Committee in the House of Lords. Points of interest from the Minister of State (Baroness Sherlock) in debates on 22 January, 26 January and 3 February 2026 include the following.

Defined contribution (DC) scale and asset allocation requirement: scope

• Exemptions from the scale requirement are intended to be very limited and grounded in “enduring design characteristics”, for example schemes serving members with a protected characteristic or certain hybrid schemes for a connected employer group.
• The Minister confirmed that collective defined contribution (CDC) arrangements are outside the scope of the scale requirement.
• The government has dismissed calls for the £25bn scale requirement to be disapplied where a scheme achieves a high rating under the value for money (VFM) provisions.
• Regulations may allow regulators (the Pensions Regulator (TPR) and the Financial Conduct Authority (FCA)) to delay the impact of the scale requirements temporarily, for example following a market crash affecting all schemes, or in the case of an individual scheme.

DC scale requirement: common investment strategy

• For the purposes of meeting the scale requirement, assets may only be included if they are managed under a “common investment strategy”. The meaning of a common investment strategy may be set out in regulations.
• The Minister resisted calls for further clarity to be given on the definition of a common investment strategy at this stage. She explained that consultation with industry will be needed to “reflect operational practicalities while ensuring that it [the strategy] still delivers genuine consolidation benefits”.
• As part of the consultation, the government will consider to what extent each member’s assets should be allocated in the same proportion to the same underlying investments.
• In response to concerns that a common investment strategy should be able to accommodate different factors, the Minister responded that government policy is to minimise fragmentation in schemes and to have a single default arrangement at the centre of each scheme’s “proposition”. Default arrangements to serve specific member needs, such as religious requirements, will be permitted but will not count towards the main scale default arrangement.

DC scale requirement: new entrant pathway relief

• A relevant Master Trust or group personal pension may apply for “new entrant pathway relief” from the scale requirement if it meets certain conditions, including having: no members yet; strong potential to grow; and an innovative product design.
• Details of the conditions will be contained in regulations. The government plans to consult to ensure that schemes can demonstrate the required attributes, before making regulations.

DC scale requirement: asset allocation and fiduciary duties

• The government received considerable pushback on its power in the Bill to require Master Trusts and group personal pensions to invest at least a prescribed percentage of their default funds in “qualifying assets”. (Qualifying assets will be defined in regulations and may include private debt or equity, venture capital or land, and may be limited to assets in the UK.) Concerns were raised about the interaction of the power with trustees’ fiduciary duties to members and where liability would lie if investments mandated under the new power perform badly.
• The Minister repeated that the government does not currently expect to have to use the asset allocation power. Instead, the power is intended to be a backstop to commitments made in the Mansion House Accord. She noted that the statutory power will expire at the end of 2035 if it has not been used and that, before exercising the power for the first time, the government must publish a report on how members’ financial interests would be affected.
• The Minister also pointed out that the Bill contains a “savers’ interest” test, which will allow Master Trusts or group personal pensions to apply for temporary exemption from the asset allocation requirement where compliance would cause material financial detriment to members.
• The Minister confirmed that the consumer duty will continue to apply to firms regulated by the Financial Conduct Authority (FCA). The FCA will be expected to apply the consumer duty in parallel to any asset allocation requirements under the new power.
• In relation to the expected statutory guidance on fiduciary duties, the Minister confirmed that work is underway and that an initial roundtable, with industry representatives and led by the Pensions Minister (Torsten Bell), took place on 2 February 2026. A technical working group will be convened and full consultation on draft guidance is expected “later in the spring”.
• The government rejected calls for schemes to be indemnified if members’ returns are worse than they would have been without mandated allocation. The Minister commented that use of public money for this purpose would create moral hazard and could encourage excessive risk-taking.
• The government considers that trustees will continue to be responsible for investing in members’ interests. The Minister commented that, if the asset allocation power is ever used, the trustee duty would still apply to: the selection of individual investments; the balance between asset classes, including private asset classes; and to any decision to apply for an exemption under the savers’ interest test.

Pension Schemes Bill: small pot consolidation

• The government aims to introduce the multiple default consolidator from 2030 onwards.
• Regulations will need to be made in advance of 2030 and are expected to include the criteria for schemes to become a consolidator and the legal framework for the necessary digital infrastructure.
• The government resisted calls to delay the introduction of the small pot regulations in order to align with pensions dashboards.

Pension Schemes Bill: guided retirement

• Defined contribution (DC) arrangements will be required to implement “default pension benefit solutions” providing regular pension income. Consultation will explore how schemes can give members appropriate support when they are presented with a default retirement plan.
• The intention is that members will be told about the concept of default retirement plans from early in their pension journey, to avoid surprise at the point of retirement. The government will have power to specify the format and structure of member communications.
• Schemes must design and develop default retirement plans based on the generality of their membership. To do so, schemes will be expected to gain insight into what the majority of members want from their pensions. The Pensions Regulator (TPR) will issue guidance on identifying members’ needs. The government will also consult on whether minimum standards for gathering information should be introduced.
• Schemes may have more than one default retirement plan, with “a simple triage” used to determine which plan is offered to each individual member.
• Regulations may specify additional conditions which default retirement plans must meet. These could include enabling a member to leave the default retirement plan after payment had commenced.
• The government expects that regulations will include exemptions from the default retirement plan requirement, for example where a DC pot is too small to generate an income above a particular threshold. The government will seek stakeholder views before setting any threshold for regular income, or a definition of retirement.
• Where it is not reasonably practicable for a scheme to offer its own default retirement plan, the trustees or managers must identify a suitable receiving scheme to which the members may be transferred, with their consent. A collective defined contribution (CDC) scheme could a receiving scheme for this purpose.
• The government expects that some schemes will voluntarily accept transfers in for the purposes of providing default retirement plans and it rejected calls for compulsion. However, if the market does not operate as intended, the government could introduce one or more schemes which are required to accept a transfer from any scheme. Such receiving schemes of last resort could be Master Trusts, or schemes designated as default consolidators under the small pots consolidation regime.

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Pensions Minister states intention to consult on strengthening transfer protections

On 26 January, in a written response to a Parliamentary question, Pensions Minister Torsten Bell confirmed the Government's intention to publicly consult "in the coming months" on strengthening the pensions transfer process with enhanced protections.

The Minister noted the existing regulatory framework which allows pension scheme trustees to block pension transfers if there is risk of a scam, in certain circumstances. However, he confirmed that the Government is "developing extended measures which seek to strengthen protections and combat any areas of evolving risk".

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HMRC Pension Schemes Newsletter 177

HMRC has issued Newsletter 177. Points of interest include the following.

Non-UK resident pension scheme administrators

Newsletter 177 includes a reminder that, from 6 April 2026, all pension scheme administrators (PSAs) of registered pension schemes must be UK resident.

• Scheme with both a UK resident PSA and a PSA which is non-UK resident: the non-UK resident PSA should remove itself as administrator of that scheme on HMRC’s pension schemes online and its managing pension schemes service by 6 April 2026.
• Scheme with only a non-UK resident PSA: the PSA will cease to be a scheme administrator on 6 April 2026 but will retain the liabilities and obligations of an administrator until a UK resident PSA is appointed. Where a scheme has no PSA, HMRC may consider withdrawing the scheme’s registration.

Inheritance tax and pensions

HMRC is inviting users to participate in research considering the design of a new digital service, which will enable PSAs and pension practitioners to report details of notices requiring the PSA to pay inheritance tax (IHT) on pension benefits direct to HMRC.

Anyone interested in participating should email [email protected].

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The Pensions Dashboards Programme publishes a consultation on proposals to update reporting standards

On 28 January, the Pensions Dashboards Programme (PDP) published its consultation on proposals to update the reporting standards it maintains on behalf of the Money and Pensions Service (MaPS). These standards concern the automated reporting of data to MaPS by pension providers and schemes. Compliance with the standards is compulsory.

The current reporting standards were published in March 2025, and require that specified data be made available to MaPS on request. In accordance with the PDP's previously-stated policy intention, the new standards will require the routine daily reporting of data (between midnight and 6am for the previous day's events) to MaPS via an application programming interface (API).

The consultation also outlines certain technical clarifications and the testing process required as part of the implementation process.

The consultation does not propose to change any of the fundamental data requirements for what must be recorded and reported.

The PDP proposes to implement the updated standards, with the requirement to have undergone all testing and to be submitting data by API on a daily basis, by 30 November 2026.

The consultation closes on 25 March 2026.

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The Pensions Administration Standards Association publishes guidance for trustees, administrators and advisers navigating buy-ins and superfund transfers

On 28 January, the Pensions Administration Standards Association (PASA) published practical guidance to support trustees, administrators and advisers in navigating buy-ins and superfund transfers: PASA De-Risking Journey Management Working Group Mythbusters: Navigating Buy-in and Superfund Transitions: A Practical Guide.

The guidance addresses the areas where schemes most often encounter "friction" including data integrity, rule alignment, member communication, deferred member complexity, risk management and resourcing. It suggests practical actions to deal with each area, including proactive risk mitigation.

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Authored by Jill Clucas and Susanne Wilkins.