The latest news on the long-anticipated Pension Schemes Bill, which was laid before Parliament and had its First Reading on Thursday, 5 June 2025, is that it is to receive its second reading on Monday 7 July 2025. Alongside the Bill, the Government published Workplace Pensions: A Roadmap which provides an indicative timeline for what is described as transformation of the UK workplace pensions system.
The First Reading is the formal stage that takes place without debate. MPs will have the opportunity to deliberate on the Bill during its Second Reading in due course.
For those who have been following developments closely, the Bill’s contents will come as no surprise. The Government has long signalled its intentions, and the Bill delivers on many of those expectations. Here are ten key measures that the Bill proposes:
1. Surplus Release: Defined benefit (DB) schemes will gain greater flexibility to release surplus funds, to help support employer investment plans. This reform also aims to encourage schemes to run-on rather than buy-out, to increase domestic investment whilst simultaneously seeking to improve member benefits.
2. Value for Money Framework: A new framework will require defined contribution (DC) schemes to demonstrate value for money, focusing on value over cost . Persistently underperforming schemes may be required to transfer members to better-performing alternatives.
3. Small Pension Pot Consolidator: Legislation will enable authorised pension providers to act as consolidators, where 'dormant' pension pots of £1000 or less will be transferred into fewer larger schemes. This seeks to address the growing problem of 'forgotten pension pots' in the UK which many retirees build up over the course of their working lives. More details on the practical considerations for trustees are expected to be covered by subsequent draft regulations.
4. Default Retirement Solutions: Trustees of DC schemes will be required to offer one or more default pension benefit solutions at the point of retirement. The measure is aimed to guide savers towards the best retirement products for their circumstances and ensure that they have an adequate income in old age.
5. DC megafunds: There will be a push towards the creation of DC 'megafunds' in order to lower average costs per member, with the Bill requiring DC master trusts and GPPs used for automatic enrolment to move towards megafund status.
6. DB superfunds: The creation of a legislative framework for the authorisation and supervision of DB superfunds.
7. Pension Protection Fund (PPF): The Bill will remove a restriction preventing the PPF from reducing its total annual levy below £100 million. It will also broaden the definition of “terminal illness” under PPF and Financial Assistance Scheme legislation to allow relevant members the opportunity to receive funds earlier on in their diagnosis.
8. Local Government Pension Scheme (LGPS): The number of LGPS pools will be reduced from eight to six, and the Government will have the power to direct an administering authority to join a specific pool if necessary.
9. Recoupment of overpayments: Measures will provide the Pension Ombudsman with the authority to make enforceable determinations in pensions overpayment cases, enabling funds to be recovered more efficiently without the need for a court order.
10. Pensions Dashboards: The Bill will grant powers to the Money and Pensions Service and the Secretary of State, enabling them to provide and regulate the display of information about the Pension Protection Fund and the Financial Assistance Scheme on pensions dashboards.
The Virgin Media Case
One further important reform has been promised, but is not included in the Pension Schemes Bill. On the day the Bill was published the Department for Work and Pensions also confirmed that the Government will introduce legislation to address matters highlighted in the Virgin Media court cases in 2023 and 2024.
In summary, this will allow pension schemes that were contracted-out between 6 April 1997 and 5 April 2016 to obtain retrospective actuarial confirmation that historic benefit changes met the necessary standards. The finer details of this have not yet been announced, and nor has any timeline been given. However, this development appears promising in resolving the uncertainties that arose as a result of the Virgin Media decision.
Conclusion
The Government has emphasised that the roadmap and timeline it has provided are indicative only. However, all being well, the Bill is expected to receive royal assent in 2026 and, for the most part (although no doubt some changes will come in sooner) to take effect fully over the course of 2027 and 2028.
If you would like to discuss any of the issues raised in this blog, please contact a member of the pensions team or your usual Brodies contact.
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