HL Pensions Law Digest 28 April 2025

Welcome to our latest update, in which we cover:

• Pensions Regulator (TPR): new innovation hub
  • In a keynote speech, TPR explains that its priorities are for innovation, data quality and decumulation.
• Pensions Regulator (TPR): DB superfunds
  • In a recent blog, TPR considers lessons learned from the three transfers to a defined benefit (DB) superfund to date.
• Pensions Regulator (TPR): Compliance and Enforcement Bulletin 
  • TPR sets out how it used its regulatory powers in the period July to December 2024.
• Pensions Dashboards: connection by first provider
  • The Pensions Dashboards Programme reports that the first provider has connected to the dashboards ecosystem in accordance with the timetable in statutory guidance.
• Insurance: consultation on changes to investment rules
  • The Prudential Regulatory Authority (PRA) is consulting on changes to matching adjustment rules, which may favourably impact annuity pricing.
• Financial services regulatory initiatives grid: notifiable events
  • An update from the Financial Services Regulatory Initiatives Forum, setting out initiatives in the pipeline for the next 24 months, plus initiatives which have completed or been stopped – notably, stopped initiatives include a Code on changes to the pensions notifiable events regime.
• Defined contributions (DC) small pots: Report 
  • A Report by the Small Pots Delivery Group, setting out recommendations for a system of compulsory consolidation of small defined contribution (DC) pots, plus the government’s response and planned next steps. For more details, please see our article.

Pensions Regulator (TPR): new innovation hub

In a keynote speech, Patrick Coyne (TPR’s Interim Director of Policy and Public Affairs) announced that:

• TPR’s new innovation hub will be launched this summer.
• DC decumulation is a priority, with the government planning to introduce a new “guided retirement” duty in the Pension Schemes Bill, obliging trustees to offer or partner with a provider of decumulation services.
• Data quality is seen as the number one barrier to innovation; to address this, TPR will be working across the pensions industry to drive consistent standards for data on metrics that matter.
• To help schemes comply with the defined benefit (DB) funding regime, TPR has reduced its data requirements and is introducing a new semi-automated digital submission form.
• TPR plans to publish guidance on DB endgames in May this year, to help trustees consider the alternative models now available.

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Pensions Regulator: transferring to a DB superfund

The Pensions Regulator (TPR) has published a blog on transferring to a defined benefit (DB) superfund, reflecting on lessons learned from the first three superfund transfers. Points to note include:

• A buyout quote is not required, when determining whether a scheme can afford to buy out. An objective estimate from an experienced actuary will be sufficient.
• Extensive due diligence on a superfund’s governance and processes is not expected, as TPR scrutinises these aspects of superfunds listed on its website.
• However, transferring scheme trustees do need to have a thorough understanding of the superfund’s business model and details of the proposed transaction.
• Transfer agreements may provide for transfer terms to be reassessed if market movements occur outside pre-agreed corridors (“boundary conditions”). TPR recognises that continuing boundary conditions right up to the transfer date may be impracticable, although trustees must explain why they are comfortable with earlier termination (such as 30 days in advance).
• TPR will issue “Defined Benefit Scheme Endgame Options Guidance”, to explore options available in 2025 for DB schemes.

TPR hopes that the forthcoming Pension Schemes Bill will provide impetus for further innovation and expansion of the superfund market, especially in relation to small DB schemes.

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Pensions Regulator: compliance and enforcement bulletin July – December 2024

The Pensions Regulator (TPR) has issued its latest compliance and enforcement bulletin, showing how it has used its powers in the period from July to December 2024.

The most commonly used powers in this period were: the power to appoint trustees to secure proper scheme administration (171 times); information gathering powers (60 times); and issuing mandatory penalties in relation to a chair’s statements (29 times).

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Pensions dashboards: first provider completes connection

The Pensions Dashboards Programme (PDP) has announced that the first provider finalised connection to the pensions dashboards ecosystem on 17 April 2025, in line with the staging timetable contained in guidance from the DWP. This follows the connection of three “volunteer participants” in March this year.

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Insurance: consultation on changes to investment rules

The Prudential Regulation Authority (PRA) is consulting on the introduction of a new “Matching Adjustment Investment Accelerator (MAIA)”.

In a nutshell, under the MAIA insurers will be able to claim Matching Adjustment (MA) benefit on certain assets without needing to obtain prior approval from the PRA. Insurers would then have 24 months to apply for approval of the MAIA assets and could continue to benefit from the MA capital treatment in the meantime.

It is hoped that the MAIA regime will enable insurers to invest more widely and that this may result in improved returns, while also benefitting the UK economy. Industry feedback suggests that the previous approval framework limited insurers’ ability to invest in certain assets, as the process for gaining prior permission could take longer than the window for investing in the assets concerned.

The PRA and industry commentators have suggested that increased returns on investment could feed through to the pricing of new individual and bulk annuity business.

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Financial services regulatory initiatives grid

The Financial Services Regulatory Initiatives Forum has published an updated version of its regulatory initiatives grid, showing the pipeline of regulatory initiatives expected in the next 24 months. Entries relating to pensions include:

• Defined benefit (DB) superfunds: the forthcoming Pension Schemes Bill is expected to introduce a legislative framework for the regulation of superfunds. The Pensions Regulator (TPR) anticipates starting work on a Superfund Code from early 2026.
• Value for Money (VfM) in defined contribution (DC) schemes: the Pension Schemes Bill is expected to introduce a VfM regulatory framework for trust-based occupational pension schemes. Further consultation is anticipated.
• Data Quality Regulatory initiative: aimed at improving data quality to enable the success of pensions dashboards. TPR has sent various targeted mailings to schemes over recent months. TPR will use information from the recent round of scheme returns from defined benefit (DB) / hybrid schemes to identify further schemes for targeted engagement.
• Regulatory framework for operators of pensions dashboards (other than the existing dashboard operated by the Money and Pensions Service (MaPS)): the Financial Conduct Authority (FCA) made final rules in November last year. The opening of the authorisations gateway, to allow other provision of dashboards by other operators, is still to be confirmed.
• Adapting the FCA framework to a changing pension market: the FCA issued a discussion paper (DP24/3) at the end of 2024, flagging three areas where further work may be needed – self-invested personal pensions (SIPPs); DC transfers and consolidation; and tools and modellers. The FCA is considering responses and intends to consult towards the end of 2025.

An annex to the grid sets out initiatives which have been completed or stopped. In relation to pensions these include:

• A new notifiable events Code following changes to the notifiable events legislation. (As a reminder, the Pension Schemes Act 2021 contains new requirements on schemes to notify certain events to TPR but these provisions have not been brought into force.)
• A regulatory initiative by TPR to assess compliance with climate-related requirements for a scheme’s statement of investment principles (SIP) and implementation reports.

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Authored by the Pensions team.