Trustee Quarterly Update

Consultation on regulations to make it easier to pay surplus from ongoing schemes

The Government is consulting on regulations designed to make it easier for trustees to pay surplus to employers and members while the scheme is ongoing.  For more detail, see our e-bulletin.  In a related measure, the Government has also published draft legislation to allow schemes to make lump sum surplus payments to members without having to grant the member a related pension.  It will only be possible to pay such “authorised member surplus payments” (AMSP) to a member who has reached normal minimum pension age (currently 55, rising to 57 from 6 April 2028) or who is eligible to receive an early retirement pension due to ill-health. (It will be possible to grant younger members the right to a future AMSP.)  It will also be possible to make an AMSP to the dependant of a deceased member.

The changes are due to take effect from April 2027.

Inheritance Tax on death benefits: information sharing regulations and Technical Note published

The Government has published the final form regulations setting out the information sharing requirements relating to the changes to the Inheritance Tax (IHT) regime from 6 April 2027 which will bring some scheme death benefits within scope of IHT.  Within 28 days of a request from the deceased’s personal representatives (PRs) the scheme administrator will be obliged to inform the PRs of the value of the “notional pension property” (ie the benefits that are in principle within the scope of the deceased’s estate for IHT purposes).  The scheme administrator must also inform the PRs of the percentage of the notional pension property to be provided to an exempt beneficiary (eg the deceased’s spouse or civil partner).  This information must be provided within 28 days of a request or within 14 days of all beneficiaries being decided if that is later.

If PRs are aware that IHT will be due on the estate, they can request the name and contact details of the beneficiaries along with the value and percentage of notional pension property to which each beneficiary is entitled.  The scheme administrators must provide this within 28 days of the request or, if later, within 14 days of all the beneficiaries being decided.

The regulations specify additional information which administrators must provide to PRs and/or beneficiaries where the administrator is served with a “withholding notice” or a “payment notice”.

On 27 August 2026 HMRC published Technical note 2: Further information on Inheritance Tax and Pensions.  The Technical Note gives an overview of the IHT regime in relation to pension death benefits and provides more detail on how HMRC envisages it operating in practice.  It includes draft templates for a withholding notice and a payment notice.  The introduction sets out HMRC's further plans.  HMRC plans to publish guidance and other supporting materials in "spring 2027.

Action required

Trustees should ask their scheme administrators to confirm that they will have the necessary systems in place by 6 April 2027 to comply with their information sharing and other duties relating to the changes.  Trustees should also consider what changes may be necessary to their scheme administration agreements.

Increase in normal minimum pension age: draft transitional provisions published

HMRC is consulting on draft regulations setting out the transitional provisions which will apply in relation to the increase in normal minimum pension age (NMPA) from 55 to 57 with effect from 6 April 2028.  Where a member starts to receive a scheme pension before 6 April 2028 aged 55 or 56, HMRC appears to take the view that, provided the first instalment of pension was paid before 6 April 2028, future instalments of pension will be authorised even if the member has not reached age 57 by 6 April 2028.  This was the approach taken by HMRC when NMPA last increased in 2010.  This interpretation is arguably at odds with a literal reading of the legislation, but it seems unlikely that anyone would have an interest in challenging HMRC on this point.  

The draft regulations provide that where a member aged 55 or 56 becomes “entitled” to a scheme pension before 6 April 2028, but the first instalment of pension is paid on or after that date, the member is deemed to have reached age 57 immediately before the date on which the first payment of scheme pension is made.  “Entitled” has a specific meaning for this purpose.  Broadly, a member only becomes “entitled” to a pension at the point that the member has done everything necessary to bring the pension into payment (eg providing bank account details).

Under the Finance Act 2004, a member becomes “entitled” to a pension commencement lump sum (PCLS) immediately before becoming “entitled” to the related pension.  The draft regulations provide that where a member aged 55 or 56 becomes entitled to a PCLS before 6 April 2028, but payment of the PCLS is not made until after that date, the member is deemed to have reached the age of 57 immediately before the date on which the PCLS is paid.

The consultation runs until 28 September 2026.

Consultation on changes to transfer values regulations

The Government has consulted on changes to the regulations governing transfer values from pension schemes.  The proposed changes relax the rules in some circumstances but introduce a new bar to transfers in others.  Here we take a look at the detail of the proposed changes and the reasons behind them. For more detail, click here.

Pensions Ombudsman can authorise reduction in benefits to recoup overpayments

Under the Pension Schemes Act 2026 trustees can now rely on a determination by the Pensions Ombudsman to reduce scheme benefits to recoup an overpayment.  The relevant provision came into force on 29 June 2026 and effectively reverses the effect of a court decision which had held that, in cases of dispute, trustees needed to obtain a court order before reducing benefits to recoup an overpayment even if the Pensions Ombudsman had already determined that this should happen. 

Updated pensions roadmap published

The Pension Schemes Act 2026 provides the legal framework for some significant changes to pensions law including new requirements for trustees of money purchase schemes to carry out a "Value for Money" assessment and a new "guided retirement" requirements under which money purchase schemes must offer members a way to receive a  regular pension income in retirement.  We take a look at what the Government's most recent "pensions roadmap" tells us about when the planned changes will come into force.  For more detail, click here.

Pensions Regulator AI plan

The Pensions Regulator (TPR) has published an AI plan which clarifies its expectations of trustees and administrators in relation to AI.  Pension scheme trustees are legally accountable for scheme decisions and outcomes even when they delegate tasks to administrators, so they need to understand where and how AI is being used on behalf of the scheme.  We look at the Regulator's expectations of trustees in relation to AI use.  For more detail, click here.

SPP paper on “Governance in the Age of AI”

What issues do pension scheme trustees need to consider in relation to AI?  We take a look at  the Society of Pension Professionals' recent paper "Governance in the Age of AI"  which considers the key questions trustees should be asking, the controls they should expect to see and the governance arrangements that should underpin AI use in a pensions context.  For more detail, click here.

Pension increase rule required trustee to look beyond next actuarial valuation

In Northumbrian Water Ltd v Northumbrian Water Pension Trustees Ltd the court had to rule on the meaning of a pension increase rule.  The rule provided for guaranteed increases equal to the preceding calendar year’s RPI increase capped at 5%.  It also provided for a potential additional increase where the relevant year’s RPI had exceeded 5%.  However, the additional increase could only be paid if after consulting the Actuary the trustees considered that this could be done without an increase in the Employer’s ordinary annual contributions as determined under the Scheme rules following the Actuary’s initial recommendation or most recent actuarial valuation.

The representative beneficiary argued that the reference in the rule to an increase in the Employer’s ordinary annual contributions referred only to an immediate increase in the employer’s contributions in advance of the next actuarial valuation.  The Employer argued that the reference to an increase in the employer’s contributions would include an increase at the next actuarial valuation.  The judge agreed with the Employer that the reference to an increase in the Employer’s ordinary annual contributions would encompass an increase following the next actuarial valuation (as well as an immediate increase).

Our thoughts

The pension increase rule for this scheme was more complex than most pension increase rules.  However, the judgment could potentially be relevant to other scenarios where consequences under the rules depend on whether an event results in an increase in employer contributions.

Rectification of deed which inadvertently introduced fetter on amendment power

In the recent case of Soufflet Bairds Malt Limited v Dear the Hight Court ordered rectification of a deed that introduced a significant fetter on the scheme's amendment power when the partied did not intend to make any such change.  We look at the factors that led the court to make a rectification order and consider the wider implications of the case.  For more detail, click here.

Ombudsman publishes updated factsheets

On 24 June 2026 the Pensions Ombudsman published updated factsheets on:

• “How to complain about your pension”;
• “Incorrect information about your pension”;
• Death benefit lump sums; and 
• Ill heath pensions.

The factsheets are designed for scheme members and may be a particularly useful resource in cases where information in the factsheet indicates the Ombudsman is unlikely to uphold a member’s complaint.

Clause headed “forfeiture” was not a forfeiture clause

It is common for pension scheme rules to contain a clause allowing trustees to forfeit benefits that have not been claimed within six years of falling due.  However, a recent Pensions Ombudsman determination highlights that the wording of such clauses is critical when determining whether forfeiture is permissible.  In the case in question the Ombudsman decided that a clause headed "Forfeiture" was not actually a forfeiture clause at all.  We take a look at how the Ombudsman reached this conclusion.  For more detail, click here.

Pensions dashboards expected to launch in financial year 2027/28

In a progress update report in July 2026 MaPS said that it expects the MoneyHelper Pensions Dashboard to be available to the public in financial year 2027/28.  A further update on expected timings will be provided around the time of the 31 October 2026 connection deadline.

PDP to require daily reporting of data by 1 March 2027

In June 2026 the Pensions Dashboards Programme (PDP) published its response to its reporting standards consultation.  The reporting standards set out requirements on pension providers and schemes for reporting operational information to MaPS.  The current reporting standards only require records to be made available to MaPS on request.  The consultation proposed a move to routine daily reporting by 30 November 2026.  Subject to DWP approval, the PDP now intends the deadline for mandatory daily reporting to be 1 March 2027.  However, from Autumn 2026 the PDP will require some data to be reported via file upload where an organisation is directly connected to the dashboards and has not yet been able to implement daily reporting.

PASA publishes guidance on several aspects of pensions dashboards

The Pensions Administration Standards Association (PASA) has published several guidance documents related to the introductions of pensions dashboards.  These include guidance on ongoing monitoring of compliance which includes tables of compliance indicators which schemes should monitor, for example excessive use of the “Temporary system error” code when members attempt to view their pension data.  

PASA has also published guidance on the data to be provided to pensions dashboards regarding the presence or absence of survivor benefits.  The guidance has been produced following liaison with the PDP policy team.  The guidance explains that the “True” flag for survivor benefits should be used where specific survivor benefits exist.  For example, a benefit consisting of payment of the DC pot where a member dies before annuitisation would not generally be considered a survivor benefit.  PASA also considers that where a scheme provides an insured spouse’s pension on the death of an active member, but there is no specific provision for a spouse’s pension on death in retirement, the survivor benefit flag should be set to “False”.

PASA has published interim guidance on responding to member enquiries about pensions dashboards.  The guidance is intended to help administrators, providers and service centres respond to enquiries clearly and consistently.  It sets out FAQs and suggested responses.  The guidance may be updated as more information becomes available.

Changes to pensions section of VAT Input Tax Manual cause uncertainty

On 4 June 2026 HMRC published changes to the pension schemes section of its VAT Input Tax Manual. The changes have raised uncertainty over whether HMRC is intending to make a change to the VAT position in relation to scheme administration costs.

Historically HMRC has accepted that VAT incurred on management/administration services in relation to an employer’s occupational pension scheme (eg legal advice in relation to the management of the scheme) can be deducted by the employer as its input tax even though it is the scheme trustees that have contracted for the services.  HMRC’s VAT Notice 700/17 which deals specifically with funded pension schemes tells employers, “You should hold tax invoices made out in your name. If the trustees pay for the supplies on your behalf, you should arrange for the suppliers to make out the invoices in your name.”  

Before 4 June 2026 HMRC’s VAT Input Tax Manual also acknowledged that where trustees contracted and paid for administration services, it was acceptable for invoices to be made out in the name of the employer to enable it to deduct the VAT as its input tax.  On 4 June 2026 that wording was deleted.  The deletion formed part of a broader set of changes to the Manual to reflect a change in approach by HMRC regarding the VAT treatment of charges for investment services, and it is unclear whether HMRC intended to change its VAT policy in relation to administration services.    HMRC updated its VAT Notice 700/17 on 9 July 2026, and the wording about arranging for suppliers to make out invoices in the employer’s name has not been deleted from the Notice.

Our thoughts

Given the current wording of VAT Notice 700/17, it is not clear that HMRC is expecting scheme trustees to make any change to their practice in relation to invoices for scheme administration services. However, since the changes to the Manual on 4 June 2026 the position is less clear than it was, and it seems likely that HMRC will issue further clarification at some point.  We understand that the Association of Pension Lawyers plans to ask HMRC for clarification.

Consultation on Value for Money framework

In July 2026 the DWP published a joint consultation with the FCA on draft regulations to introduce the Value for Money (VfM) framework.  The VfM framework will require trustees of workplace pension schemes providing money purchase benefits to assess their schemes against a detailed set of metrics set out in legislation, and to take action if the scheme is underperforming by reference to those metrics.  The VfM framework will not apply to AVC arrangements in schemes that are otherwise defined benefit. 

The current consultation builds on previous consultations.  The main changes since the previous consultation are:

• phased implementation so that in 2028 only master trusts, single employer trusts with 50,000 or more members, and open personal pension schemes will complete full VfM assessments and assign ratings.  Other in-scope schemes will only submit data to regulators, which will not be published.  The regime will apply to all in-scope schemes from 2029 onwards;
• the first data collection period will be shortened to July (instead of January) to December 2027;
• for the 2028 assessment, no formal consequences will apply to underperforming schemes;
• the DWP is now consulting on whether data submitted in March should only be made public in November, after schemes have published their assessment reports;
• for member cohorts with zero years to retirement, arrangements will only be compared with others targeting the same decumulation option (eg an arrangement targeting drawdown will be compared with other arrangements targeting drawdown);
• a new geometric averaging methodology will be used to measure investment performance;
• the requirement for trustees to obtain third party advice on forward looking metrics will be replaced with a requirement for mandatory disclosure of underlying assumptions;
• there are changes to what data will be made available for the purpose of assessing investment performance.

Action required

Schemes that will be in scope for VfM assessments should consider how their plans will be affected by the latest consultation proposals.

Regulations to allow multi-employer CDC schemes come into force

On 31 July 2026 regulations came into force to allow for the operation of collective defined contribution (CDC) schemes with multiple unconnected participating employers. Previously the legislation on CDC schemes had not permitted such schemes to have multiple unconnected participating employers.

DWP to review FAA rules

In a parliamentary statement made in June 2026 the government announced that it will be reviewing the legislation on flexible apportionment arrangements (FAAs).  FAAs allow an employer ceasing to participate in a defined benefit scheme in deficit to avoid becoming liable for an exit debt under section 75 of the Pensions Act 1995.  Under an FAA the exiting employer’s liabilities are apportioned to one or more of the remaining scheme employers.  

The review appears to have been prompted by a transaction in which Aberdeen assumed responsibility for the Stagecoach Group Pension Scheme under an FAA. Aberdeen was effectively acting in a similar way to a superfund operator, ie taking on the defined benefit scheme of an unrelated company in the hope of ultimately making a profit from it.  The government had not anticipated FAA legislation being used in this way.

Following the DWP announcement, the Pensions Regulator published a blog post explaining that it had been consulted following the Aberdeen/Stagecoach FAA, and that as a result of the transfer the scheme trustee was able to pay an immediate uplift to benefits and share potential ongoing surplus between the members and the new sponsoring employer.

Legislation allows PPF to set a zero levy

In June 2026 provisions of the Pension Schemes Act 2026 were brought into force which will allow the PPF the flexibility not to set a levy in a particular year whilst retaining the power to raise a levy in subsequent years.

PPF consults on updated valuation assumptions

The PPF is consulting on proposed changes to the assumptions used for PPF valuations (ie to estimate the cost of securing PPF levels of compensation with an insurer).  The consultation follows a review of bulk annuity market pricing, which found pricing had become more competitive since the PPF’s last detailed review. The main proposed changes cover discount rates and longevity assumptions. The proposed updates are intended to keep the assumptions aligned with current buy-out pricing and would generally reduce estimated scheme liabilities.

The consultation closes at 5pm on 16 September 2026. Subject to the outcome of the consultation, the PPF intends to publish its final decision in October 2026. The proposals currently envisage the revised assumptions applying to valuations with an effective date on or after 31 May 2026.   

Government consults on increasing General Levy rates

The Government is consulting on increasing the General Levy.  The General Levy (not to be confused with the PPF levy) is used to fund the Pensions Ombudsman and some activities of the Pensions Regulator and the Money and Pensions Service (MaPS).  The amount of levy that a scheme pays is dependent both on what type of scheme it is and how many members it has.  The consultation proposes an increase in levy rates of 5% pa for defined benefit/hybrid schemes, 6.2% pa for DC schemes other than master trusts and 9% pa for master trusts.  The proposed increases will apply for the years 2027/28, 2028/29, and 2029/30.  The consultation closes at midday on 8 September 2026.

GAD digital resilience blog sets out 5 key actions for schemes

The Government Actuary’s Department (GAD) has published a blog post setting out five key actions every scheme should consider to enhance its “digital resilience”.  These are:

• Getting the basics right on cyber-security with strong passwords, multi-factor authentication, encryption and regular software updates.  The next step is to use real-time monitoring tools to detect suspicious activity and penetration testing to detect vulnerabilities. Trustees should work closely with administrators and third party suppliers to ensure security protocols are aligned.
• Planning for the worst: schemes should have clear incident response and disaster recovery plans in case their administration platform goes offline or is breached.
• “Know your suppliers”: trustees should carry out due diligence on suppliers’ security and resilience, including incident response, backup arrangements and recovery time objectives.
• “Train your people”: ensuring everyone involved with the scheme receives regular training on digital threats, data handling and what to do when something does not look right.
• “Test, test, test”: response and continuity plans should be tested regularly using real-world scenarios.