Pensions Essentials - March 2026

The Pension Schemes Bill provides that master trusts and GPPs that are used for auto-enrolment will need to be approved in relation to a main scale default fund by 2030. This is defined as a fund where a member has made no investment choice and which has assets of at least £25 billion. The £25 billion test is at the fund level rather than the scheme level, so a main scale default fund can be used by more than one GPP or master trust if the schemes are “connected” and if the assets are managed under a common investment strategy.

Where a scheme has a main scale default fund that has reached £10bn by 2030 and there is a credible plan to get to £25 billion, it can apply for a form of transitional approval. The Bill is silent on the time period that will be allowed to reach £25bn, but the Government has said that it will be 5 years. 

More detail on the conditions for transitional relief will be set out in regulations, and this current lack of clarity is causing problems. Some consultants are concerned about recommending schemes that do not already meet the scale requirements as auto-enrolment vehicles, because if a scheme ultimately fails to reach scale, the employer would need to look for a new auto-enrolment arrangement. This could prevent such schemes from ever achieving scale as it would deter new business. 

DWP and TPR statements: To combat this, DWP has issued a statement explaining its intentions, which is accompanied by a statement from TPR. TPR says that “employers and their advisers should not assume that all master trusts not yet at scale will be unable to meet the criteria” and they want to ensure “that members do not suffer unnecessary upheaval and increased costs due to the market over-estimating the risk of a scheme not meeting the scale requirements”.

DWP’s statement says that schemes that do not yet have a default fund of sufficient scale should consider:

• Developing a credible plan to build to scale – including how they intend to fund growth, expected revenue streams, projected operational and technical costs, and how investment planning and risk will be managed.
• Building investment capability – demonstrating how investment functions will be strengthened in line with the expectations of a scheme at scale, including the ability to access a broader range of investments.
• Building governance capability – setting out how governance arrangements will evolve to support the transition to scale and how a scheme will be able to operate effectively at scale once it exits the transitional pathway.
• Ensuring appropriate expertise is in place - including identifying the skills, personnel and systems required to support scaled operations across both governance and investment functions.
• Developing robust growth estimates - supported by clear underlying assumptions.

Guidance will set out what will amount to a credible plan to reach scale. TPR says that schemes “will likely need to provide a clear, actionable roadmap document with key delivery milestones and strategies to achieve them. These plans should focus on growth forecasts underpinned by a range of appropriate assumptions and supported by robust evidence.”

It is also worth noting that an opposition amendment to the Bill has been approved by the House of Lords to allow regulations to give TPR a power to treat a master trust or GPP as meeting the scale requirements if it was “satisfied that there is no reasonable evidence that consolidation of the scheme into another arrangement would be likely to improve outcomes for members”. As the benefits of scale are somewhat nebulous and likely to emerge over time, it is not clear how useful this change will be in practice. It is also possible it will be removed when the Bill returns to the Commons.

TPR’s most recent survey of the DC landscape shows that the number of DC schemes has continued to decrease and is now at 790 (having only fallen below 1000 in 2024). The decrease is primarily driven by those with fewer than 5,000 members exiting the market. Master trusts account for the majority of DC scheme memberships.

TPR clearly welcomes the reduction in smaller DC schemes and says in its accompanying press release that: “As we move towards a market of fewer larger schemes, master trusts now dominate. We believe that larger schemes are better placed to deliver value for money, including stronger investment returns and better service… In the new pensions world, we urge pension trustees of smaller schemes, in particular, to review their scheme today. Those that cannot match the stronger performers should consolidate out of the market and transfer savers to a better value scheme.” Consolidation is clearly something we will be hearing a lot about over the next few years, and that the Pension Schemes Bill will encourage.

TPR also reminds schemes that the Pension Schemes Bill contains provisions on guided retirement which will require DC trustees to provide members with a default retirement solution that provides a regular income in retirement. TPR says that in preparation for this, “an understanding of current decumulation products is essential for monitoring how decumulation offerings and saver access decisions evolve”. As a result, for the first time, it has analysed the data from scheme returns on retirement options which shows:

• Uncrystallised funds pension lump sums are the most prevalent decumulation product and account for 44% of all members’ withdrawals and 52% of total assets accessed.
• Drawdown is the next most commonly offered decumulation product. Although offered by only 16% of schemes, it covers 43% or 13.4 million members. This is driven by larger schemes.
• Over half of schemes offer at least one decumulation product, but these are concentrated in larger schemes.
• Just under a quarter of schemes offer at least one product which provides members with an ongoing income – but this covers 55% of members aged over 50. The largest schemes are more likely to offer at least one in-scheme regular income product.

TPR’s accompanying press-release says that: “We urge trustees to start getting ready for the Pensions Schemes Bill by reviewing their offer and starting to design their decumulation products. If you are not able to guide savers into the right retirement options for them… you should consider consolidation into a scheme that can offer value for money solutions.” However, it is worth noting that the guided retirement provisions in the Bill expressly envisage the possibility of transferring members to another scheme at retirement where it would provide them with a better outcome. 

TPR has also issued a blog on how schemes should be planning for guided retirement and factors that they might want to take into account, including contribution patterns. The blog suggests that members who have had an early career break may, for example, “need a different glidepath, different guardrails, and potentially different income smoothing mechanisms from a member who hasn’t”. Default options “must evolve for the reality of modern working lives… we need to design for the members we have, not the members we once assumed.”

The DB landscape has undergone a dramatic shift in recent years, resulting in the majority of schemes being in material surplus. This has in turn created more options for trustees in relation to what the long-term future of their scheme should be and the endgames that they envisage.

The Pensions Schemes Bill should provide further options. In particular, it is intended to facilitate access to surplus by employers where schemes are being run on, and it will also provide a new regulatory framework for superfunds which may encourage more providers into the market and lead to more schemes considering consolidations. 

TPR says that because trustees now have a range of options, they need to make decisions about the future, including:

• whether and at what point to exit the DB landscape through the traditional buy-out route;
• how and when to utilise the surplus that exists, either through running-on or at the point of buy-out; and
• whether to consolidate through the new superfund regime. 

TPR wants to understand how the DB universe is likely to evolve to ensure that it can act appropriately to protect member interests. As a result, it has undertaken some detailed modelling looking at what is likely to happen over the decade starting from 31 March 2025. At that point there were around 4,700 private sector DB schemes holding £1.1 trillion of assets with around 9 million savers. The total surplus was around £92 billion. The modelling shows that over the decade:

• Over 75% of schemes will potentially be able to buy out, and 50% are expected to do so. The insurance market is likely to be able to absorb all of these schemes, although there may be some short-term pressures.
• There is space in the market for both insurers and superfunds to operate.
• Buy-out surplus could increase to around £120 billion and TPR’s discussions with industry suggest that around half of large schemes are considering running on in the short to medium term to access the surplus. It will be for trustees and employers to decide when and how they do so and how surplus is shared with members.
• For schemes open to new entrants, ongoing surplus can be used to meet £30 billion of the cost of accrual.

TPR concludes that: “Now is the time for trustees to understand all the options and plan to determine the future of their schemes over the following decade. Doing so will ensure that pension schemes are well run, provide savers with the benefits they are expecting, and enable both savers and sponsors to use the material buy-out surplus that now exists.”

Given that the new funding and investment strategy regime requires trustees to engage in long-term planning, this is something that most schemes will already have given considerable thought to, so this analysis may not actually add much to the picture in practice.

The PPF had already announced that it was intending to charge a zero levy for conventional DB schemes, provided that changes were made in the Pension Schemes Bill to allow it to increase the levy in the future. As the PPF is now confident that those provisions will become law, the final levy rules confirm that position.

The PPF’s policy statement notes that there are provisions in the Pension Schemes Bill which will increase PPF compensation by providing for the indexation of pre-1997 benefits. However, the PPF considers that its current funding position and future projections allow it to absorb the financial impacts of this change whilst still allowing for a zero conventional levy. 

As a result of the levy decision, the PPF is reconsidering the data it needs from schemes. They will still need to submit an annual return via Exchange which must still include information on section 179 valuations and asset-backed contributions. However, schemes will no longer need to provide:

• voluntary information that was previously submitted to obtain a levy saving, including: deficit reduction contribution and contingent asset certifications; or
• any data previously submitted directly to the PPF – such as ABC certificates, contingent asset documents, special category employer applications and exempt transfer evidence.

The PPF will continue to charge a levy for “alternative covenant schemes” (ASCs). These are schemes that are not supported by a traditional employer covenant such as superfunds. Given the small number of such schemes, the PPF considers that they present a limited risk but acknowledges that this could change and it is concerned to “ensure that conventional levy payers are shielded from any levy impacts of this emerging market”. As a result, it will continue to charge a risk-based levy in relation to ASCs and will keep this under review in future years. It will also carry out a review of the levy methodology in relation to ASCs to ensure that the levy is proportionate to the risk that superfunds pose.

Data has shown that there has been a year-on-year increase in reports of impersonation fraud involving unauthorised access to members’ accounts, particularly in relation to scheme members living in Africa. The fraud has resulted in significant losses of pension savings, with around £500,000 lost between 2021 and 2025 and a further c.£2,500,000 at risk.

TPR is urging trustees and administrators to:

• review identity and verification check procedures to ensure they remain robust;
• review data security for letters and documents that are posted to overseas addresses;
• encourage members to strengthen online security by adopting two-step verification and stronger passwords; and
• tell Report Fraud about any suspected fraud immediately, even if they are not completely sure.

Normal minimum pension age is the earliest age that benefits can be taken for most people except on incapacity grounds. It is currently age 55 but legislation is in place to increase it to 57 from 6 April 2028. The legislation also sets out details of when members will have an entitlement to retain an earlier pension age.

However, what is not clear is what the position is in relation to members who will already be over the age of 55 when the change is made in 2028, but who will not yet have reached age 57 at that point in time. HMRC said in its most recent newsletter that work “on the transitional regulations that will support the implementation of the normal minimum pension age increase is ongoing” and the regulations “are intended to ensure that individuals who are entitled to and have already begun receiving their pension benefits can continue to do so without interruption”.

Although legislation provides for the minimum age at which benefits can be taken, this has to be considered alongside the scheme rules. Schemes do not have to permit benefits to be paid from the minimum pension age – they can set out a higher age. Alternatively, where scheme rules historically provided members with a right to a lower pension age, members may have retained a right to retire at that lower “protected pension age”. HMRC reminds schemes that there are rules around when members may retain a protected pension age following a transfer to another pension scheme and circumstances in which this right may be lost. HMRC specifically refers scheme administrators to guidance on block transfers and wind-ups and additional guidance around the right to take benefits before age 57.