The year ahead: What to expect, and what needs to happen

1. Pensions dashboards

Large pension schemes, providers and all public service schemes will connect to the pensions dashboards ecosystem during 2025, with ‘medium’ schemes and providers then connecting during the first nine months of 2026. The statutory backstop connection date is 31 October 2026.

All pension schemes in scope will be busy in 2025 preparing for connection. The Pensions Regulator’s (TPR) initial guidance provides a helpful overview of the requirements, while the Pensions Dashboards Programme has details of the mandatory standards for connection.

2. Pension Schemes Bill

The Pension Schemes Bill is expected to be introduced into parliament in 2025. From what we know at present, it will predominantly relate to defined contribution (DC) matters, including a standardised Value for Money framework for trust-based DC arrangements.

It is also expected to include measures related to the automatic consolidation of deferred small DC pots, retirement solutions for DC scheme members, and investment reforms resulting from the first phase of the Pensions Review.

Defined benefit (DB) matters that will also be covered include commercial superfund consolidation, and confirmation that the Pensions Ombudsman is a competent court under section 91 of the Pensions Act 1995. This means that trustees will no longer have to obtain a County Court order to enforce an ombudsman’s decision where the scheme is entitled to recoup a member’s overpaid benefits.

3. DC and LGPS Pensions Investment Review

The final report from phase one of the government’s pensions review is expected in spring 2025.

We know from the interim report that the government wishes to make structural, investment and governance changes to the Local Government Pension Scheme (LGPS) and, by 2030, significantly scale up and consolidate multi-employer DC schemes used for automatic enrolment.

The proposals are intended to encourage pension fund investment in UK productive finance and improve member outcomes. The DC changes will, if implemented, significantly change the landscape with fewer, larger schemes with improved governance and the resources to invest more flexibly – including in UK private equity and infrastructure.

4. Section 37 developments

A government announcement on this may be forthcoming in 2025. We wait to see whether it will step in to allow retrospective validation of contracted-out DB scheme rule alterations that would otherwise be rendered void because of a failure to obtain written actuarial confirmation under section 37 of the Pension Schemes Act 1993.

Without intervention, the impact of the Court of Appeal’s July 2024 ruling on section 37 could have widespread ramifications for affected schemes. The High Court is also due to consider section 37, among other issues, in the case of Verity Trustees Limited v Wood in February or March 2025. Certain further aspects of the effect of failing to comply with section 37 should be clarified when the Verity judgment becomes available later in 2025.

5. Extension of collective DC framework

The government intends to legislate to extend the whole-life collective DC (CDC) pension scheme regime to unconnected multiple employer schemes including master trusts. This will be achieved under regulatory powers in the Pension Schemes Act 2021. TPR will also issue a revised CDC code of practice.

6. Potential DB reforms

During 2025, we expect the government to clarify its plans for encouraging DB pension fund investment in UK productive finance through scale and consolidation.

We also await a decision as to whether it will take forward the previous government’s proposals to set the Pension Protection Fund up as a public consolidator for DB schemes that cannot access an endgame solution through a buyout or a commercial superfund.

7. Pensions and inheritance tax changes

We should have further details soon of how the government will bring unused pension funds and death benefits within the scope of inheritance tax, as announced in the Budget.

The accompanying inheritance tax consultation indicates that the only authorised death benefits that will not be included in the value of a deceased’s estate are a dependant’s scheme pension and a DC charity lump sum death benefit.

8. Revised DB funding and investment regime

Those DB schemes with actuarial valuations with effective dates on and shortly after 22 September 2024 will be the first cohort of schemes required to produce their valuation under the new funding and investment regime that came into effect on 6 April 2024.

Among other requirements, trustees must produce a funding and investment strategy detailing the scheme’s long-term objective and what the scheme’s funding level and intended investment allocation will be at the relevant date. This must be no later than when the scheme is expected to reach (or did reach) significant maturity.

A scheme should have low dependency on the sponsoring employer in terms of both funding and investment by the time it is significantly mature. TPR’s updated employer covenant guidance was published on 4 December 2024.

Schemes in that first cohort will have a lot to do by way of preparation during 2025. The new regime documents will have to be submitted to TPR using its new online digital service, which is expected to be launched in spring 2025.

9. TPR’s Code of Practice and the own risk assessment

Occupational pension schemes with 100 or more members must complete their first ‘own risk assessment within 12 months starting with the last day of the first scheme year that begins after 27 March 2024, when the general code of practice came into effect.

This means that a scheme with a year end of 31 March will need to complete its first assessment by 30 March 2026. Schemes will need to prepare for their first assessment during 2025.

10. Environmental, social and governance issues

ESG is a recurrent key theme for pension schemes, and there are already forthcoming developments in this area expected over the coming year.

These include TPR’s review of ESG investment governance practice and decision-making, and an updated UK Stewardship Code that is expected to come into effect on 1 January 2026.

We may also see a government review on a potential extension of the statutory climate risk governance and reporting requirements for larger schemes to other occupational pension schemes not yet in scope. This was expected in 2024 and did not happen – but may well be taken forward by the current government.

Michael Collins is a pensions partner at Gateley Legal.