Accessibility tools

Pension Schemes Bill puts value under the spotlight

Pension Schemes Bill puts value under the spotlight

12 Jun 2025

The Pension Schemes Bill has been introduced before Parliament, setting out the necessary legislative framework for significant reforms to pension arrangements in the UK.

Within the defined benefit sector, the Bill provides for well-funded schemes to access surplus, as well as creating a framework for the regulation of superfunds and removing some of the restrictions on the Pension Protection Fund when setting levies.  

For defined contribution arrangements, it introduces the Value for Money framework and places a duty on trustees to implement guided retirement options. It also introduces automatic small pot consolidation, as well as further driving the consolidation of
multi-employer DC funds by requiring a minimum level of assets.

Read our full XPS Insights here

What you need to know

  • The Pension Schemes Bill (the Bill) has been introduced before Parliament, setting out the necessary legislative framework for significant reforms to pension arrangements in the UK.
  • Within the defined benefit (DB) sector, the Bill provides for well-funded schemes to access surplus, as well as creating a framework for the regulation of superfunds. It also removes some of the restrictions on the Pension Protection Fund (PPF) when setting levies.
  • For defined contribution (DC) arrangements, the Bill introduces the Value for Money (VfM) framework and places a duty on trustees to implement guided retirement options. It also introduces automatic small pot consolidation, as well as further driving the consolidation of multi-employer DC funds by requiring a minimum level of assets.
  • The Bill continues with some further miscellaneous provisions including further support for the rollout of pensions dashboards, re-establishing The Pensions Ombudsman (TPO) as a competent court, and permitting compensation schemes to pay terminally ill members at an earlier stage of their illness.
  • The Bill is not expected to receive Royal Assent until mid-2026 at the earliest.

Actions you can take

  • Consider whether accessing surplus is suitable for your scheme, in line with its long term strategy
  • Review DC pension arrangements and plan for the new Value for Money framework or consider consolidation options
  • Prepare for the new DC guided retirement requirements by reviewing the current support trustees provide to their members and beginning to plan for the required changes
  • Continue to monitor upcoming developments, including the start of the second phase of the Government’s pensions review


The key announcements from the Pension Schemes Bill

The finer detail: New announcements in more detail

DB surplus extraction Well-funded DB schemes will be able to release money back to employers and members, subject to appropriate safeguards being in place. This surplus could be used to improve member outcomes, as well as providing a boost for scheme sponsors. There may be new alternatives for using surplus where the long-term objective of buyout may no longer be a priority for schemes. However, strategic and operational discipline will still be paramount for schemes.
Superfunds The Bill establishes provision for the regulation of DB superfunds, which offer an alternative endgame for schemes that are unable to buyout with an insurer, increasing the security of member benefits.
Megafunds The Bill seeks to progress the consolidation of DC default arrangements by requiring multi-employer DC schemes to hold a minimum level of assets of £25bn in their default arrangement by 2030 or be on the pathway to completion by 2035 for smaller schemes defined as having at least £10bn in a single default arrangement.
Value for Money
framework
This measure will implement a framework to assess and compare, and ultimately improve, the value delivered by all workplace DC schemes. Schemes will be required to publicly publish data and assess a range of metrics against industry benchmarks or comparator schemes and then determine whether the scheme is delivering on value for money.
Guided retirement
options (decumulation)
Trustees will be required to implement guided retirement options within DC arrangements, ensuring that a default decumulation product is offered to members. Savers will still retain the freedom to make their own decisions, but the default option is aimed to provide an additional level of support for savers.
Small pot consolidation Under proposed plans, small pension pots with a value of less than £1,000 will be automatically consolidated into providers acting as consolidator schemes, or the member can opt out of this. Small pots will be transferred to members’ largest pots, with the intention of building scale and consolidating into a small number of larger, better value schemes, reducing inefficiencies in the current system. This will require operational changes for schemes.
Pension Protection
Fund levies
The Bill makes provision to give more flexibility to the PPF when setting the annual conventional levy imposed for DB pension schemes. The new flexibilities will allow the PPF Board to reduce levies, potentially to zero if further PPF funding is not required.
Pensions dashboards The Government continues to support the introduction of pensions dashboards, which should provide savers with a summary of all their pensions savings. This will also include information that the PPF and Financial Assistance Scheme (FAS) holds on members to be displayed on a government-backed pensions dashboard service.
LGPS consolidation The Bill creates an opportunity for LGPS to pool assets together which will include greater expertise, offer better value for money and greater resilience.
Virgin Media Whilst not included in the Bill, the Government has also confirmed that legislation will be introduced to enable affected pension schemes to retrospectively obtain actuarial confirmation that historic benefit changes met the necessary requirements.

Find out more

For further information, please get in touch with Thomas DummiganAndrew Beattie or speak to your usual XPS Group contact.

Related links

Download PDF

Back to insights and briefings
  • Register for events
  • Join our mailing list
Register for events

We enjoy hosting a wide range of events for pension scheme trustees, corporate sponsors, independent trustees, and pensions professionals.

Full list of upcoming events

Join our mailing list

Keep up to date with our latest news and views including pension briefings, XPS insights, reports and event invitations.

Sign up