The Pension Schemes Bill 2024-25: what this means for your pension scheme

What does the new pensions legislation mean for you?

On 5 June 2025, the Pension Schemes Bill 2024 - 25 (the Bill) was introduced into Parliament. The Bill represents the culmination of policy development covering private sector defined benefit (DB) and defined contribution (DC) pensions (both trust and contract-based) and the public service Local Government Pension Scheme (the LGPS).

The main thrust of the legislation is to realise the Government's ambition for UK pension savings to play a material role in the economic development of the country. This is to be achieved by encouraging "bigger, better and less fragmented schemes" that are better placed to invest in a broader range of investment categories. This includes investment in UK-based 'productive finance' (i.e. infrastructure, housing, private equity, unlisted companies and start up funding).

What the Bill means for you and your pension scheme will mainly depend on the type of scheme in question. DB provisions are limited to laying the groundwork for regulations that will, in prescribed circumstances, permit the return of surplus to employers. In addition, the statutory framework for commercial DB consolidators (superfunds) may become relevant for a growing number of schemes.

The biggest changes will be seen in DC schemes (especially larger, multi-employer commercial DC arrangements) and in the LGPS. Some of the DC reforms will also impact on hybrid schemes that have money purchase benefits that meet the statutory definition to be in scope (e.g. the Value for Money Framework).

The timeframe for implementation stretches to 2030 (or 2035 for commercial schemes that take advantage of a transitional period to build up the required level of assets under management needed to meet new quality requirements relating to the scale of default investment funds). This does not, however, mean that the Bill can be put to the bottom of the pile of issues. Implementation will be staggered, so LGPS reforms may be carried out as soon as 2026, with the Government targeting 2027 and 2028 for other reforms to come into force.

Milestones in the development of the Bill

Milestones in the development of the Bill infographic transcript

• 10 July 2023 - Mansion House speech
• 11 July 2023 - Consultations and calls for evidence on private sector DB and DC and LGPS reform
• 22 November 2023 - Autumn Budget Statement
• 23 February 2024 - Options for DB Schemes consultation opened
• June 2024 - General Election and Manifesto commitments on pension reform
• 20 July 2024 - Launch of the Pensions Investment Review
• 14 November 2024 - Interim report of the Pensions Investment Review
• 14 November 2024 - Mansion House speech
• 29/30 May 2025 - Final Report of the 'Pensions Investment Review' and the government response to 'Options for DB Schemes' published
• June 2025 - Government publishes roadmap for future pensions policy rollout
• 5 June 2025 - Pension Schemes Bill 2024 - 25 introduced in Parliament
• 17 July 2025 - King's Speech confirms new primary legislation
• Q1 2026 - Pension Schemes Bill 2024 - 25 becomes law
• 2026 - 2027 - Consultations on regulations for DC and DB reforms
• 2027 - 2028 - Regulations come into force

Key point summary of the Bill and implementation timetable

Defined benefit pensions

Policy area: DB - return of surplus

• Impacts on: Defined benefit occupational pension schemes
• Key points:
  • Regulations will be introduced that provide a statutory override so that trustees can modify scheme rules:
    • to introduce the power to return a surplus to employers (where no such power currently exists); or
    • to amend an existing power (where a power exists but is subject to restrictions).
  • The power to return surpluses will be subject to various safeguards, including:
    • amending Section 37 of the Pensions Act 1995 to make it clear that trustees may only return surpluses if that would be in accordance with their duties to scheme beneficiaries;
    • setting a funding threshold in regulations ensuring that any return of surplus is subject to strict funding safeguards;
    • requiring actuarial confirmation and member notification before a payment is made from the scheme to the sponsor.
• Timeline:
  • 2026 - Regulations consulted on and laid.
  • 2027 - Guidance issued. Regulations come into force.

Defined contribution pensions

Policy area: DC - Value for Money Framework

• Impacts on: Money purchase schemes and money purchase benefits in hybrid schemes
• Key points:
  • Regulations will be made which will introduce the new Value for Money Framework (the VFM Framework). The regulations will:
    • set out which schemes and benefits will be subject to the VFM Framework (including which money purchase benefits in hybrid schemes);
    • specify how and which data, assessments and ratings should be calculated, produced, notified to The Pensions Regulator (TPR) and published, and the timeframes for doing this. This is likely to include public disclosure of certain value for money data; and
    • specify how an assessment under the VFM Framework should be carried out.
  • Trustees and managers will need to assign a value for money rating to each scheme and arrangement that is assessed and to inform TPR  of that rating. The Bill sets out three ratings ('fully delivering', 'intermediate' and 'not delivering') and specifies the consequences of assigning an intermediate or 'not delivering' rating. In addition, regulations may set out further categories in order to provide a more granular approach to the ratings. 
  • Compliance and enforcement (including the ability to substitute ratings) will be carried out by TPR. 
• Timeline:
  • 2026 - 2027 - Regulations consulted on and laid.
  • 2028 - First VFM Assessments. Publication of value for money data.
  • 2029 and onwards - Annual VFM Assessments and data publication.

Policy area: DC - Small and deferred pots

• Impacts on: Money purchase schemes
• Key points:
  • Regulations will be introduced to set out detail on the Government's preferred approach for dealing with non-exempt small and deferred money purchase pension pots (i.e. the multiple default consolidator model). 
  • Pots that will be subject to mandatory consolidation are those pots:
    • valued at £1,000 or less; 
    • where a member has not made an active investment decision; 
    • where no contributions have been paid in for at least twelve months; and
    • which are not subject to exemptions (e.g. for protected pension ages).
  • Consolidator schemes will be eligible master trusts or FCA-regulated pension schemes / arrangements. 
  • Regulations will set out the framework for how the small pot consolidation system will work in practice. This will provide more detail and timings on the scheme-level consolidation process, member notification and transfers to consolidators.
• Timeline:
  • 2027 - 2028 - Regulations consulted on and laid.
  • 2029 - Small pot consolidators selected.
  • 2030 - Small pot transfer duty in force.

Policy area: DC - retirement options

• Impacts on: Money purchase schemes
• Key points:
  • Provides the statutory footing for regulations that will set out mandatory retirement options for DC schemes to make available to members. 
  • The choice for DC schemes will be to either provide these options themselves or be able to transfer to another scheme that can provide the options (or where transferring will provide a better outcome for members). 
  • For schemes that choose to offer default retirement options, regulations will require:
    • a default decumulation option which will provide members with access to their pension benefits without having to make a choice;
    • a default pension benefit solution that is designed to deliver money purchase benefits to eligible members that will provide a regular income in retirement;  
    • making available a range of decumulation options which are informed by the choices that a member has made over the lifetime of their saving (e.g. if the member has indicated they would like a lump sum payment before entering the default retirement income provision arrangement).
• Timeline:
  • 2026 - 2027 - Guided retirement regulations and rules consulted on and laid.
  • 2027 - Duty in force for master trusts.
  • 2028 - Duty in force for other DC schemes.

Policy area: DC - bulk transfer without consent

• Impacts on: Contract-based defined contribution arrangements (e.g. Group Personal Pensions)
• Key points:
  • Create a contractual override regime for the contract-based workplace pensions market analogous to the bulk-transfer without consent regime that applies to trust-based DC pension schemes.
  • Transfers will be subject to a 'best interests test' and certified by an expert who is independent of the provider and meets requirements that will be set out by FCA rules.
  • Members will need to be notified prior to the transfer of required information to be specified by the FCA. Transfers can only be made by a provider once a notice period has expired.
  • Savers who do not agree to a proposed contractual override will be able to 'opt-out' of the transfer but will have to select their own alternative destination arrangement.
• Timeline:
  
  • 2028 - Contractual override and internal default consolidation.

Policy area: DC - commercial scale

• Impacts on: Commercial DC providers - master trusts (subject to exemptions) and contract-based DC arrangements
• Key points:
  • Non-exempt commercial multi-employer automatic enrolment workplace pensions providers and schemes will need to have:
    • at least £25 billion of assets under management;
    • in a 'main scale default arrangement' (a concept that will be defined in regulations);
    • by 2030 (with a transitional regime for schemes that reach £10 billion by 2030 and that can demonstrate the ability to reach £25 billion by 2035).
  • Exemptions will apply to collective money purchase schemes, sole and certain multi-employer master trusts (e.g. industry-wide or serving protected characteristics such as religion).
  • A new entrant pathway providing for the approval of new schemes which do not initially meet the scale requirements (but do meet other prescribed requirements) will ensure competition and innovation is still possible.
  • In addition to the scale requirements, the Bill also includes  a power for the Government to set quantitative baseline targets for pension schemes to invest in a broader range of private assets.
• Timeline:
  • 2030 - Deadline for reaching £30 billion target.
  • 2035 - End of transitional period.

Commercial DB consolidators (superfunds)

Policy area: Superfunds

• Impacts on: Defined benefit occupational pension schemes
• Key points:
  • The Bill defines superfunds as trust-based occupational schemes that have a 'capital buffer' and are not supported by a 'substantive employer covenant'.
  • Superfunds will only be able to accept transfers of DB liabilities from another trust-based occupational scheme.
  • Schemes should not operate as superfunds until they have received authorisation from TPR. They will also be subject to ongoing requirements designed to ensure the viability and effective management of the superfund and that it is administered effectively in the interests of members.
  • Transfers to superfunds will be subject to a TPR approval process.
  • TPR will be responsible for the overall compliance and enforcement regime applying to superfunds.
  • Provision will be made so that superfunds fit into the legislative framework for occupational pension schemes despite not having an employer.
• Timeline:
  • 2026 - Regulations consulted on and laid.
  • 2027 - Guidance issued. Regulations come into force.
  • 2028 - TPR code comes into force. Regulations come into force.

Local Government Pension Scheme

Policy area: LGPS - LGPS funds and LGPS pooled funds

• Impacts on: LGPS funds and LGPS pooled funds 
• Key points:
  • LGPS pooled funds will have a statutory definition. Regulations may set conditions they must meet (e.g. being FCA regulated or reaching a prescribed level of assets under management (with the Secretary of State having a power to order the merger of LGPS pooled funds). 
  • All LGPS investments will be managed by an LGPS pooled fund. 
  • Regulations will set out a duty for LGPS funds to work with 'strategic authorities' in their areas to identify local / regional investment opportunities. 
  • Governance measures, including requiring LGPS funds to carry out governance reviews at prescribed periodic intervals.  
  Timeline:
  • 2026 - LGPS scheme order consulted on and laid. 

Miscellaneous provision in the Bill

In addition to the main policies set out in the table above, the Bill contains miscellaneous provisions dealing with various pension issues that will require primary legislation.

Defining The Pensions Ombudsman as a 'competent court' for the purposes of recouping overpayments

The Bill will amend existing legislation to treat a determination by the Pensions Ombudsman as an order of a 'competent court' for the purpose of recouping overpayments.

Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) definitions of terminally ill

The Bill will extend the definition of 'terminally ill' under PPF FAS legislation to cover those with a life expectancy of twelve months (extending from the current requirement, which is a life expectancy of six months).

PPF levy restrictions

The Bill will alter current restrictions relating to the PPF levy so that the PPF Board has more flexibility on the levy that is set each year, including deciding not to set a levy at all.

Facilitating PPF and FAS information on pensions dashboards

The Bill will make it possible for PPF and FAS benefit information to be displayed on the MoneyHelper pensions dashboard and on qualifying pensions dashboard services.

Timeline for implementation of the Bill

Timeline for implementation of the Bill infographic transcript

Value for Money Framework

• 2026: Consultation / call for evidence
• 2027: Passage of secondary legislation
• 2028: Implementing systems / processes
• 2029: Law or regulatory requirements come into force

Small Pot Consolidation

• 2026: Consultation / call for evidence
• 2027: Passage of secondary legislation

Decumulation / Retirement Options

• 2026: Consultation / call for evidence

Commercial DC Consolidation and Scale

• Master Trusts: Ongoing activity (continuous arrow across timeline)

Contract DC Bulk Transfer Without Consent

• Ongoing activity (continuous arrow across timeline)

DB Scheme Surplus

• Ongoing activity (continuous arrow across timeline)

DB Superfunds

• Ongoing activity (continuous arrow across timeline)

LGPS Asset Pooling

• Ongoing activity (continuous arrow across timeline)

Next steps and actions

Defined benefit schemes

The introduction of new powers to permit the return of surpluses to employers will be of interest to many trustees and sponsors of DB schemes. It will be particularly relevant for schemes that have built up a large surplus in recent years and/or those trustees and sponsors that want to deploy a more ambitious approach to scheme investments but have been put off by the risk of 'trapped surpluses'. The Bill and related Government publications make it clear that the Government is serious about this policy, with a target for this to be in force in 2027.

Trustees and employers should add this to the list of issues to discuss, especially if the scheme is approaching or undergoing valuation and/or is particularly well funded. Working together on this issue could produce material benefits for both scheme members (in the form of enhanced benefits) and employers (with the ability to invest extracted surplus).

In addition, superfunds will be of interest to some DB scheme employers and trustees. The statutory and regulatory regime should ensure that superfunds become a more mainstream option and one that should be considered as part of risk transfer discussions.

Hybrid schemes with 'in scope' money purchase benefits

In addition to the DB issues outlined above, trustees of hybrid schemes that have 'in scope' money purchase benefits will need to keep an eye on developments in the DC space. The Bill anticipates that regulations will specify which policies will apply to which type of money purchase benefits. Once this is clear, trustees will have to decide whether to get ready to comply with the new requirements or consider transferring money purchase benefits to master trust or other DC arrangements.

Commercial defined contribution schemes / arrangements

Commercial non-exempt multi-employer automatic enrolment workplace pension schemes and arrangements (which, in plain English, effectively means non-exempt master trusts and commercial contract-based pension providers e.g. GPP providers) will already be focused on the scale requirements set out in the Bill. The requirement has been clearly signposted in policy development (e.g. in the Pensions Investment Review).

At least four master trusts already have over £25 billion in assets under management. Another four to six should, based on asset growth levels over the past few years, reach the £25 billion target by 2030. Almost all of the rest will reach £10 billion in the same timeframe. Master trusts may still want to explore consolidation and/or develop new business models to ensure that they are at a sufficient scale to not only meet statutory requirements but also to offer value for members.

One of the main focuses for this sector will be working out how the definition for 'main scale default arrangement' applies to their scheme and whether any changes are needed to ensure that the main scale default arrangement meets the target.

In addition, the in-scope DC schemes and arrangements will need to work through the other DC policy items. In particular, they will want to explore:

• whether to apply to become default small pot consolidation schemes;
• whether to develop and market their default retirement benefit options for use by DC schemes that cannot or do not want to offer these.

Both of these options would have the benefit of helping with building up scale. Contract-based DC providers will also be focused on the introduction of bulk-transfer options and will want to explore how this can be rolled out internally to streamline operations as well as how it will work for external requests.

Other defined contribution schemes / arrangements

Trustees and managers of DC schemes / arrangements will have a number of decisions to make and issues to focus on. The two priority items will be:

• whether to provide default retirement / decumulation options for members. If trustees cannot or do not want to do this, they will need to explore options for this to be provided externally and develop the member notification and transfer-out process; and
• compliance with the VFM Framework. As the Bill progresses and more detail is provided on what a VFM Assessment entails, trustees will need to ensure that they are ready to comply with the regime. Although there is a long lead time before the duty will apply, it is likely to need a dedicated project to ensure that all the required information is available, that third party providers are working together and ensuring compliance and legal sign off.

In the longer term, trustees will need to deal with the default small pot consolidation regime. This is also likely to require a project, bringing together the scheme's administrators and other professional advisers to ensure that the process works and is legally compliant.

LGPS funds and LGPS pooled funds

LGPS administering authorities and LGPS pooled funds have been focused on these developments for a long time - the antecedents to the Bill's provisions go back a number of years. The Bill and related Government documents provide more detail and a timeframe for implementation, enabling managers to make decisions. Most will, however, await secondary legislation and guidance before making any major moves.