Welcome to the March edition of our Taylor Wessing Pensions Bulletin in which we give a snapshot of some of the many recent pensions developments, which include:
Investment guidance – an update
In previous editions of the bulletin, we have referred to the Government's intention to produce guidance in relation to trustee investment duties. Recently proposed amendments during considerations in the House of Lords to the Pensions Schemes Bill appeared to provide for some form of guidance on this issue (by way of amendments to the Pensions Act 1995). These said that trustees, amongst others, would be required to have regard to that guidance (to be issued by the Secretary of State), which would relate to certain aspects of the legal requirements for a statement of investment principles (s35(4)) and choosing investments (s36(1)) in the Pensions Act 1995 and regulations. The explanation wording accompanying the proposed amendments said that the guidance may have explained what 'financially material considerations' (including 'environmental, social and governance considerations') and 'best interests of members' mean in those provisions.
However, the House of Lords has rejected these amendments and it is again now not clear how the proposed investment guidance will be facilitated. It is nevertheless an area that trustees will need to monitor, especially as to how it will interact with existing investment duties. We will provide further information on any developments in this regard.
Mandation provisions in the Pensions Schemes Bill rejected in the House of Lords
The so-called 'mandation' provisions in the Pensions Schemes Bill have been the source of much industry debate due to concerns about the impact on trustee fiduciary duties and investment powers. The mandation provisions consist, broadly, of a reserve power for the government to, in effect, compel the default funds (note not necessarily the same as the 'main scale default funds' which are defined elsewhere in the Bill) of certain schemes (DC master trusts and DC group personal pension schemes that are used for automatic enrolment) to allocate a minimum percentage of assets to specific categories, including UK private equity, private debt, and venture capital, if voluntary targets are not met. Much of the detail will be provided for in regulations and there is a limited sunset provision in the Bill which provides that the percentage cannot be increased after 2035.
The Pensions Minister, reportedly, very recently confirmed that the government was proposing to clarify the provisions to limit their remit to the Mansion House Accord, which was an agreement in May 2025, by 17 of the UK's largest pension providers voluntarily expressing their intention “to achieve a minimum 10% allocation to private markets across all main default funds in their DC schemes by 2030, with at least 5% of the total going to UK private markets”.
However, in the most recent development (as of 19 March), the House of Lords has now rejected these mandation provisions. It remains to be seen whether or not the government will attempt to re-visit this in the later stages of the Bill but clearly this is an area of contention in the passage of the Bill which is anticipated to become law in the Spring. Trustees and providers of affected schemes will naturally be concerned with the outcome but this is also of interest in the market generally, particularly given other conversations about how the government might be attempting to play a role in pension scheme investments (see above also in relation to the proposed investment guidance).
Salary Sacrifice amendment legislation – a bumpy ride through Parliament
We reported the key salary sacrifice changes in the Autumn budget in our previous bulletin, and legislation is currently passing through Parliament (National Insurance Contributions (Employer Pensions Contributions) Bill) to bring this into effect, though not until April 2029. This has been another area subject to much debate, with the House of Lords suggesting a number of significant amendments, which included raising the proposed cap of £2000 for national insurance relieved employee salary sacrifice contributions to be set out in the first set of regulations under the Bill to £5000, and exempting basic rate tax payers from the cap entirely. These amendments have now been rejected in the House of Commons and the Bill will return to the House of Lords for further consideration.
The government has also clarified certain aspects of the proposals, for example that the cap will apply on a per job basis as opposed to per individual. However, given its contentious nature, what the final Bill will look like is not completely clear; we will provide updates on developments as the Bill proceeds.
PPF confirms zero levy for 'conventional' DB schemes for 26/27
In previous editions of our bulletins, we have mentioned the developments around the 26/27 Pension Protection Fund (PPF) levy. The PPF has now confirmed that it will not charge 'conventional' DB schemes a PPF scheme levy for 26/27, and that it will maintain a proportionate risk-based levy for alternative covenant schemes, working with industry to evolve its methodology in this regard over the course of 26/27. Although previously proposed, this confirmation will be welcomed for the c5000 conventional DB schemes (PPF figures) it protects and which will benefit from this zero levy. The PPF has now published its Policy Statement and final rules for the 26/27 levy which can be found here.
Finance Act 2026; inheritance tax provisions
We have previously mentioned the government's proposed changes to the inheritance tax treatment of certain death benefits. These have now been put in place through amendments in the Finance Act 2026 (which received Royal Assent on 18 March 2026), and will bring most unused pension funds and death benefits within the scope of inheritance tax from April 2027. The final provisions include many changes from the original draft, such as the removal of a requirement for individuals to be 'active members' in relation to death in service lump sum benefits paid from a registered pension scheme for those benefits to be exempt from forming part of a deceased's estate for inheritance tax purposes (which now reflects what was understood to be the policy intention). This otherwise would have caused an issue for, for example, life assurance only members of occupational pension schemes where individuals would not be 'active members' as described.
Given the important new ways in which these tax provisions will need to be administered by schemes and their interaction with personal representatives of deceased members' estates, trustees must ensure they fully understand the implications of the new measures. If you need any assistance in this regard we would be happy to help.
STOP PRESS – TPR issues guidance on the Virgin Media case remedial provisions in the Pension Schemes Bill
We have reported in previous bulletins on the Virgin Media case and its impact on certain pension schemes that were contracted out on a defined benefit basis, and the proposed remedies in the Pension Schemes Bill for the issues arising from that case. The Pensions Regulator (TPR) has now published guidance on those remedial provisions - in draft, recognising that those provisions have not yet become law but saying the guidance will be updated to reflect the final version.
The guidance is aimed at 'trustees, scheme managers and responsible authorities (collectively ‘governing bodies’) of occupational pension schemes that:
- were contracted-out on the salary-related basis at any point between 6 April 1997 and 5 April 2016
- have not been fully wound up or transferred to the Pension Protection Fund (PPF) or the Financial Assistance Scheme (FAS) at the date the Bill receives Royal Assent'.
It also says that under the Bill, 'all the affected alterations of schemes that have been fully wound up or transferred to the PPF or the FAS at the date the Bill receives Royal Assent, will be treated as having met the requirements of the regulations from their original effective date and so are to be treated as valid'.
The guidance aims to act as reminder of the statutory duties involved with this issue generally and the standards TPR will expect to achieve compliance with the requirements. It describes the processes involved where schemes are looking to use the remedial provisions in the Bill and also practical tips, as well as saying that although the remedial provisions will only be available when the Bill has passed, schemes can give written instructions to the scheme actuary to start the work now. Notably the guidance also says that schemes will not need to report their remedial actions to TPR.
This, along with the FRC guidance for actuaries on this matter which we have also previously reported on, will be an important document for affected schemes looking to use the remedial provisions to consider – we have been advising a number of schemes dealing with these issues and would be happy to assist any others that are in this position.
