Trustee Quarterly Update June 2026

Pension Schemes Act 2026 receives Royal Assent

The Pension Schemes Act 2026 received Royal Assent on 29 April 2026.  This means that the “fix” provisions to address issues arising from the Virgin Media judgments in relation to “section 37 certificates” are now in force (see separate item on this).  The Act also contains provisions covering the following:

• The Pensions Ombudsman to have the same authority as a court to authorise scheme trustees to reduce a member’s benefits to recoup an overpayment.  This change comes into force on 29 June 2026 and effectively reverses the effect of a previous court decision which had held that the Ombudsman was not a “competent court” for this purpose.  The court decision had meant that even where the Pensions Ombudsman had found that it was appropriate for trustees to reduce benefits to recoup overpayments, trustees still needed to obtain a court order before making a deduction if the member disputed the amount.
• A new power for trustees to modify an ongoing scheme to allow a surplus payment to the employer.  The Pensions Regulator’s recently published annual funding statement indicates the DWP will be consulting on regulations dealing with the detail; the Pensions Regulator will publish a statement providing “early views” on the issues trustees should consider around surplus release; and that this measure is likely to come into force in 2027.  
• The introduction of a new “Value for Money” (VfM) Framework requiring trustees of money purchase schemes to assess their scheme against metrics set out in legislation and take action if the scheme is underperforming.  The first VfM assessments are unlikely to be required before 2028.
• New requirements for schemes providing money purchase benefits to provide a “default pension benefit solution” by which members can take a regular income in retirement.  The Government’s initial “roadmap” suggested it planned to bring these measures into force in 2028.
• Consolidation of small dormant money purchase pension pots in auto-enrolment schemes.  The regime will provide for these to be transferred to authorised “consolidator” schemes.  Schemes are not expected to come under a duty to transfer pots before 2030.
• New minimum fund size requirements for authorised master trusts.  These are not due to be fully in force before 2030.
• A new regulatory regime for pension superfunds.  The Government’s original roadmap indicated an intention to bring these into force in 2028.
• A new power for the Government to introduce regulations mandating that a proportion of the main default funds of master trusts and group personal pension scheme must be invested in certain types of asset.  The powers in this controversial clause have been significantly watered down compared to the version originally introduced into Parliament.  The power cannot be exercised before 1 January 2028.

We understand that the Government plans to issue a revised “roadmap” setting out its proposed timeline for bringing the changes into force.

Section 37 certificate “fix” provisions come into force

The Pension Schemes Act received Royal Assent on 29 April 2026.  The measures designed to provide a “fix” for the issues stemming from the Virgin Media case came into force on that date.  For more detail, click here.

Act to make changes to salary sacrifice regime receives Royal Assent

The National Insurance Contributions (Employer Pensions Contributions) Act 2026 has received Royal Assent.  The Act provides the statutory framework for the Government to provide that, from April 2029, only the first £2000 of pension contributions made via salary sacrifice each tax year will be exempt from National Insurance contributions.  Employers will need to consider whether they may wish to make changes to their salary sacrifice arrangements well in advance of 2029 to ensure that any desired changes can be implemented.

Inheritance Tax developments

The Finance Act 2026 received Royal Assent on 26 March 2026., The Act will bring many pension scheme death benefits within the scope of inheritance tax (IHT) where death occurs on or after 6 April 2027.  One important change since the legislation was originally published is that a member no longer needs to be an “active member” for the exemption for lump sum death in service benefits to apply.  This makes it clear that the exemption can to life assurance only members.  For more detail, click here.  

Using ChatGPT may result in loss of legal privilege

The Upper Tribunal’s decision in the immigration case of UK v Secretary of State for the Home Department suggests that putting correspondence into open source AI tools such as ChatGPT amounts to placing the information on the internet in the public domain and thus to waiving legal privilege.  (Broadly, the concept of legal privilege means that a party to legal proceedings who is generally under a duty to disclose all relevant documentation is not required to disclose legal advice.)  The Tribunal made clear that its comments did not apply to closed source AI tools such as Microsoft Copilot.  

The Tribunal’s judgment highlights that neither legal advice nor other documents containing confidential information should be put into open source AI tools such as ChatGPT.

Member not entitled to early payment of deferred benefits following TUPE transfer

In the case of McKavney v Serco Group Plc, the High Court dismissed a member’s appeal from a decision of the Deputy Pensions Ombudsman (DPO).  The judge agreed with the DPO that the member’s transfer to a new employer under TUPE did not trigger early retirement rights payable on redundancy or compulsory retirement due to a reorganisation.  For more detail, click here. 

Distress and inconvenience awards likely to increase

We understand that the Pensions Ombudsman is reviewing the amounts it will award for distress and inconvenience.  The current factsheet which sets out the amounts that could be paid for distress and inconvenience, published in 2018, is marked “Currently under review – March 2026”.  If the figures are updated, this will change the figures that trustees could pay as authorised payments when compensating a member for distress and inconvenience in circumstances where the member would have a valid Pensions Ombudsman claim.

Scheme not entitled to recover overpayments where widower was wrongly assured his pension would continue on remarriage

The Pensions Ombudsman (TPO) has held that the Teachers’ Pension Scheme is not entitled to recover pension overpayments of almost £33,000 which occurred as a result of a widower’s pension continuing when the scheme rules provided for it to cease on remarriage.  For more detail, click here. 

No defence to recovery of overpayments where pension payments doubled

The Pensions Ombudsman (TPO) has upheld a scheme’s right to recover overpayments in a case where the member’s pension unexpectedly almost doubled (CAS- 71331-S0R8).  TPO found that there was insufficient evidence that the member acted in good faith.  This inevitably meant that the member’s “change of position” defence to the overpayments claim failed, as good faith is an essential element to such a defence.  For more detail, click here.  

Ombudsman sets out expectations of trustees in overpayments cases

In a recent determination the Pensions Ombudsman (TPO) has set out his expectations of trustees in overpayments cases where the member objects to recovery of the overpayment (CAS-44682-N7X6).  The facts of the case were quite specific, with TPO ultimately upholding the right of the trustees to recover the overpayments from the member.  However, the determination makes some general points regarding TPO’s expectations of trustees seeking to recoup overpayments.  TPO says, “The Ombudsman will generally consider whether any potential defences are likely to apply. However, the Ombudsman expects that these potential defences will also have been explored and explained by trustees prior to a complaint reaching the TPO, and a recovery plan proposed. If the trustees do not consider that the defences apply, the Ombudsman expects the trustees to explain why, so that the applicant can respond. This should ensure that all parties’ positions are fully set out by the time the complaint is made and the Ombudsman can then determine who is correct.”

Our thoughts

As a matter of law, TPO cannot insist that trustees raise potential defences to an overpayments claim where those defences have not been raised by the member. However, in practice it makes sense for trustees to consider potential defences at an early stage to avoid the time and expense of dealing with complaints to TPO in circumstances where TPO is likely to find in favour of the member.

Scheme remained liable for member’s benefits where no adequate evidence of valid transfer

The Deputy Pensions Ombudsman (DPO) has held that a scheme retained liability for providing benefits to a member who the scheme trustees believed had transferred out in 1992.  The determination provides a useful indication of the Ombudsman’s likely approach when it is unclear whether a member has transferred out or not (CAS-13126-Z0N2).  For more detail, click here. 

Complaint upheld where member died before receiving serious ill-health lump sum

The Deputy Pensions Ombudsman (DPO) has upheld a complaint against the scheme employer and administrator after delays meant a terminally ill member died before receiving a serious ill-health lump sum (SIHLS) (CAS-82342-D5V2).  The amount of the death benefit payable was significantly less that the amount that would have been payable to the member as a SIHLS.  The employer had been aware for over 5 months that the member had only a few months to live.  For more detail, click here.  

Member entitled to pension increases on transferred in benefits

The Deputy Pensions Ombudsman (DPO) has found that a member was entitled to pension increases on his transferred in benefits where his transfer value quotation quoted an annual pension figure from a specified date and said, “All benefits will be paid in the same way as your normal scheme benefits.”  For general information about the scheme, it directed the member to the explanatory booklet or to write to the trustees.  The transfer value quotation did not say anything specific about pension increases.  

The DPO found that the member was entitled to increases on his transferred in pension on the same basis as applied to pensions that accrued in the receiving scheme.  The scheme trustee asserted that the reference to benefits being paid “in the same way” as for normal scheme benefits referred only to payment methods and not to the increase provisions, but the DPO rejected this argument.  Such a restrictive reading would result in the benefits not being fully defined, for example regarding early and late retirement and commutation options.  If the statement in the transfer quotation was intended to refer only to payment methods, it was not clear why it referred to the explanatory booklet at all.  The DPO also noted that the transferred in benefits included a GMP in relation to which legislation required a minimum increase rate, so granting a pension with no pension increases at all in respect of the transferred in benefits would have breached contracting-out legislation.

Our thoughts

It is common for benefits granted in respect of transfers in not to be fully documented under the scheme rules.  This case provides a useful indication of factors that the Ombudsman is likely to take into account when deciding what benefits have been granted in respect of a transfer in.

Dashboards publications

In April the Pensions Regulator (TPR) published a blog, “Pensions dashboards: are schemes ready for the next step?”   The blog says that most large schemes are already connected and have increased their focus on data, but that value data preparations lag behind personal data with significant work still required.  TPR also says that schemes need to embed data monitoring into business as usual activity rather than treating it as a one off exercise.  TPR says it has updated its dashboards guidance to provide clarity on areas TPR is often asked about.  It now provides two checklists to help schemes prepare for dashboards, one for schemes working to connect and one for schemes already connected.

In May TPR announced that it had launched a regulatory initiative targeting defined benefit and hybrid schemes to assess how they are preparing their data ahead of connecting to dashboards.  The new initiative will target 240 private sector schemes and will focus in particular on readiness and accuracy of value data.

Industry alert on impersonation fraud

In March the regulator issued an industry alert on the risk of impersonation fraud.  TPR has noted a rise in impersonation fraud involving unauthorised access to members’ accounts, including a heightened risk to members of UK pension schemes who now reside in Africa.  Fraud methods include:

• identity theft and account takeover, allowing fraudsters to change the bank account on record and withdraw funds;
• setting up a fake account in a member’s name and moving funds from the real account to the fake account;
• accounts being accessed by fraudsters who are known to the member; and
• diverting pension funds belonging to deceased members without the next of kin’s knowledge.

The alert urges schemes to review their fraud prevention measures such as member identity verification checks, educate members on reducing the risk of fraud, and to report suspected pension fraud to Report Fraud.

Annual funding statement

The Pensions Regulator (TPR) has published its 2026 Annual Funding Statement.  New developments in this year’s statement include:

• reference to the surplus release provisions of the Pension Schemes Act 2026.  The DWP will be consulting on regulations dealing with the detail.  Around the same time TPR will publish a statement providing “early views” on the issues trustees should consider around surplus release.  Later this year TPR will consult on more detailed surplus guidance to sit alongside the final regulations which are expected to come into force in 2027;
• TPR is reviewing the definition of low risk schemes for the purpose of submitting a statement of strategy, particularly how this applies to schemes that have a buy-in covering all members;
• for the purpose of grouping schemes into funding categories, TPR has divided Group 1 into two sub-groups: Group 1A, funding level well above low dependency (110% funded or more); and Group 1B: funding level at or just above low dependency (100% to 110% funded).  TPR expects schemes in Group1A that are running on to consider their policy on surplus;
• clarifying that classifying employer covenant strength as “inadequate” will of itself not generally trigger regulatory engagement.  TPR is more likely to engage when it considers that an assessment of the covenant strength as adequate is not justified;
• a request that details of all contingent assets are submitted in relation to the funding and investment strategy, even when those assets are not being actively relied on to support funding and investment strategy risk;
• guidance on valuing “non-look through” guarantees (eg guarantees based on the PPF template);
• guidance on the treatment of surplus and of asset-backed contributions when assessing supportable risk; and
• clarification on the low dependency funding basis and the low dependency investment allocation.

Regulator publishes expectations of trustees re AI use

In May the Pensions Regulator (TPR) published its AI plan outlining its role and approach to supporting the use of AI, including its expectations of scheme trustees and administrators in relation to AI use.  TPR expects scheme trustees to:

• establish clear governance and accountability for the use of AI systems and technologies;
• assure themselves that their administrators, service providers and advisers have robust governance arrangements in place;
• carry out rigorous testing, assurance and ongoing monitoring, both at the point of implementation and on a regular basis afterwards;
• identify and evaluate risks, make sure appropriate controls are in place and review and adapt them as necessary; and
• work to prevent members being scammed by being aware of AI-driven fraud methods and responding effectively to the evolving fraud threat.

TPR also recommends that trustees, administrators and other providers:

• invest appropriate time and resources to understand AI technologies including responsible uses, limitations and risks;
• are transparent with scheme members and stakeholders about AI use where appropriate;
• stay informed on UK government guidance, emerging standards and cross-industry best practice; and
• share experiences, successes and concerns with others in industry and TPR so that good practice can be adopted and risks managed effectively.

Data

TPR expects trustees to:

• have a clear data strategy, allocate resources for improvements and challenge service providers where standards are not met;
• ensure that scheme and member data is high quality, as a critical input into AI-supported processes;
• comply with data protection legislation and guidance, including as it relates to automated decision-making and the use of information in AI systems;
• understand how AI models use and process data and ensure there are robust controls in place.

Innovation

TPR expects trustees to seek “appropriate and proportional” professional advice when considering or implementing innovations.

PPF confirms no levy for conventional schemes for 2026/27

The PPF has published its final 2026/27 levy rules, confirming its decision not to charge conventional schemes a levy for the levy year 2026/27.

Regulator urges trustees of smaller DC schemes to consider transferring to a master trust

In March 2026 the Pensions Regulator (TPR) published a blog post urging trustees of smaller DC schemes to consider whether their members’ interests would be better served by transferring into a master trust/winding up the current scheme.  TPR has also published guidance for trustees of smaller DC schemes on considering whether to transfer to a master trust.  For the purposes of the guidance TPR defines "smaller” schemes as those with fewer than 5000 members.  TPR highlights the additional regulatory requirements that the Pensions Schemes Act 2026 is due to introduce for DC schemes such as the requirement to carry out “Value for Money” assessments and the requirement to provide a “default pension benefit solution” via which members can take a regular income in retirement (a feature which many smaller DC schemes currently do not currently provide).

Transitional provisions re increase in normal minimum pension age

HMRC’s Pension schemes newsletter 180 provides information about the transitional provisions that are likely to apply in relation to the increase in normal minimum pension age (NMPA) from 55 to 57 with effect from 6 April 2028.  (NMPA is the earliest age from which a member is generally permitted to receive benefits in the absence of ill-health.)  Without transitional provisions, members who start to receive their benefits at age 55 or 56 in line with the current NMPA, but who will not have reached age 57 by 6 April 2028, could find their benefits suddenly becoming unauthorised due to the member not having reached (the new) NMPA.  For more detail, click here. 

PASA guidance on trustee-administrator lifecycle

The Pensions Administration Standards Association (PASA) has published parts 3 and 4 of its guidance on the “trustee-administrator lifecycle”.  Part 3 deals with installing a new administrator.  It includes a checklist of points for trustees to consider as part of their oversight of the installation.  Part 4 deals with building and managing an effective partnership between trustees and administrators.  It includes a list of potential elements for inclusion in a governance framework.

PASA guidance on calculating contingent spouse pension values

In April the Pensions Administration Standards Association (PASA) published guidance outlining the different approaches that may be adopted when calculating values for contingent spouse pensions (CSP), and the circumstances in which the different approaches may be appropriate.  The guidance highlights that the appropriate approach will depend on how the CSP values will be used and the quality of the underlying data. For example, where CSP values are required to support initial feasibility or pricing discussions for a potential buy-in, a pragmatic approach using proportionate assumptions may be appropriate. However, if the CSP values are intended to enable more efficient administrative calculation or a buy-out transaction a higher degree of accuracy and supporting audit trail will be required.