HL UK Pensions Law Digest 19 May 2025

Welcome to our latest update, in which we cover:

• Mansion House Accord
  • As has been widely reported, signatories from the pensions industry have committed to the ambition of investing 10% of default fund assets in private markets by 2030;
• Pensions Regulator (TPR): help with retirement choices
  • TPR welcomes a report on the state of the at retirement market and calls for the development of a retirement “sat nav”;
• Pensions Policy Institute (PPI): report on UK retirement income market
  • An in-depth report from the PPI, exploring how the current DC decumulation market results in sub-optimal outcomes for many savers and how this could be improved;
• Pensions Dashboards Programme (PDP): progress report May 2025
  • An update from PDP, including on its plans for user testing following connection of the first schemes and providers.

Mansion House Accord

The Mansion House Accord has been launched by the Pensions and Lifetime Savings Association (PLSA), the Association of British Insurers (ABI) and the City of London Corporation.

The Accord is a voluntary expression of intent by signatories from the pension industry to commit to the ambition of:

• A minimum 10% allocation to private markets across all their main defined contribution (DC) default funds by 2030; and
• Within that allocation, at investing at least 5% of the total in UK private markets.

The commitment is subject to fiduciary duties and the Consumer Duty and depends on supporting actions by the Government and regulators, including:

• A pipeline of UK investment opportunities facilitated by the government;
• A market shift from cost to value, supported by the proposed Value for Money (VFM) framework; and
• Alignment between the government and the Financial Conduct Authority (FCA) on: the VFM framework; the scope of the charge cap; and permitting bulk transfers without consent when in savers' best interests.

In the Accord:

• Private markets means the following unlisted asset classes: equities, property, infrastructure, and debt/credit; and
• UK private markets means where the underlying assets are based in the UK.

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Pensions Regulator (TPR): help with retirement choices

The Pensions Regulator (TPR) has issued a press release and speech on the need for help with retirement choices, prompted by the publication of the PPI’s report on the retirement income market (please see below).

In relation to retirement income, TPR has:

• Called for development of a retirement “sat nav” to simplify options and empower savers to make informed decisions;
• Welcomed plans for the Pension Schemes Bill to include a guided retirement duty;
• Commented that its new innovation hub will support the implementation of new ideas; and
• Emphasised the importance of its data strategy, and promotion of common standards, in enabling the better integration of pensions into the wider financial ecosystem.

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Pensions Policy Institute: report on UK retirement income market

The Pensions Policy Institute (PPI) has issued a report “Assessing the UK Retirement Income Market”, sponsored by the Pensions Regulator. The Report surveys the current defined contribution (DC) landscape for the decumulation phase, focussing on how savers access and use their pension savings. Key findings include the following.

Lack of data

• Understanding the DC decumulation market is hindered by lack of information about individual savers’ behaviour and total savings across multiple pots. This lack of data about member circumstances limits schemes’ ability to deliver more comprehensive or tailored support.
• Forthcoming legislation on default retirement pathways may generate helpful new data points on post-retirement engagement and outcomes.

Role of advice and guidance

• Over 70% of DC withdrawals are made without taking regulated advice or Pensions Wise guidance; and 55% of DC pot holders do not know that fees apply to their funds.
• The Financial Conduct Authority (FCA)’s proposals for Targeted Support would enable savers to be given actionable suggestions, relevant to all savers in similar circumstances. However, providing Targeted Support will be a regulated activity, subject to FCA permissions. Questions arise on how the proposals could be extended or adapted for use in the trust-based occupational scheme sector.
• Government and regulators should consider whether trustees could (or should) more proactively encourage members to engage with guidance, including through use of targeted interventions for certain groups.
• Emerging technologies, including artificial intelligence, can support the provision of low-cost automated guidance and behavioural nudges. Some providers are already offering digital tools and modellers, enabling tailored comparisons and projections without providing regulated advice.

Unintended decumulation defaults

• Default decumulation pathways largely do not exist in the current post-retirement income market.
• In the absence of default decumulation pathways, two unintended default (and potentially suboptimal) decumulation outcomes have developed:
  • Withdrawal of the entire pot as cash; or
  • Making no active decision and remaining invested in the same fund as before reaching retirement age; potentially in a fund which is designed for pre-retirement accumulation not for long-term income withdrawal.

Potential features of new default decumulation pathways

• A “flex then fix” strategy, under which savings are held in income withdrawal initially and then annuitised at a later date, could provide a balanced approach for many savers. How the withdrawal rate and the timing of annuitisation are set would be key.
• Any default decumulation strategy would need appropriate “off-ramps”, to enable savers to opt out where choosing a customised option would better meet their needs.
• Some providers are already using “bucket” approaches, with an individual’s savings segmented into different buckets with differing intended uses and timescales.
• More secure retirement income while keeping some flexibility could also be gained by using deferred annuities or decumulation-only collective defined contribution (CDC) arrangements.

Current challenges with Value for Money in decumulation

• The default fund charges cap does not apply to decumulation products and there is currently no framework for assessing VFM in decumulation.
• Charges for retirement products can be complicated and difficult to compare.

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Pensions dashboards: progress report May 2025

The Pensions Dashboards Programme (PDP) has issued a further progress report. Highlights include the following.

Regulatory approach

• Further reassurance is given that the Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) will take a pragmatic approach, making clear that at the current time there will be no regulatory intervention where schemes or providers are unable to meet their “connect by” date in DWP guidance because of reliance on an industry provider which has not yet connected.

MoneyHelper pensions dashboard

• Following the connection of the first pension providers and schemes to the dashboards ecosystem, the Money and Pensions Service (MaPS) will undertake consumer testing, enabling individuals to see real data about their pensions.
• Two phases of consumer testing are planned:
  • From summer 2025, the first phase will invite users to participate via workplace pension schemes and research panels;
  • In the second phase, from autumn 2025, users will be invited to participate via providers, schemes and other sources.

Private sector dashboards

• Standards for private sector dashboards operators are under development.
• Although delivery of the MoneyHelper pensions dashboard is being prioritised, the government remains committed to the principle of private sector dashboards. The pathway for private sector dashboards will be informed by progress with connection to the dashboards ecosystem.

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Authored by Jill Clucas.