Pensions: what's new this week - February 3, 2025

New rules on accessing DB surpluses

The Government has confirmed that it will change the rules on accessing surpluses in DB schemes. The announcement suggests that all DB schemes would be able to change their rules to permit surplus extraction with the agreement of both trustees and employers. Further details will be published in spring, in a response to last year’s Options for Defined Benefit Schemes consultation.

This announcement is part of the Government’s growth strategy; it envisages that scheme trustees and sponsoring employers could use surpluses to ‘increase the productivity of their businesses – to boost wages and drive growth or unlock more money for pension scheme members’. While there is an emphasis on freeing up money for investment in the UK economy, the announcement does note that trustees have a fiduciary duty to act in the best interests of their members and will need to strike a deal with employers on how best scheme members can also benefit.

The Pensions Regulator (TPR) has published a statement supporting the proposals, subject to proper protections for members being in place.

The Chancellor also announced in a related speech that the final report on Phase 1 of the Government’s Pensions Investment Review will be published in spring. 

Read the Government’s press release.

Read TPR’s statement.

Read the Chancellor’s speech.

PPF levy reduction, policy statement and levy rules for 2025/26

The Pension Protection Fund (PPF) has published its Policy Statement and Levy Rules for 2025/26 and announced that it has reduced its levy estimate by more than half, to GBP45 million. The PPF expects that 99.7% of schemes will see a reduction in levy next year and the average levy as a proportion of liabilities will fall from 0.011% to 0.006%.

The reduction in the levy estimate is in response to both the strengthening funding position of the PPF and an announcement that the Government will consider giving the PPF more flexibility on setting the levy. Currently, legislation limits any increase to the levy to 25% of the previous year’s amount. This restriction disincentivises the PPF from setting a low levy, as that would limit their ability to raise a higher levy quickly in future years if needed. It also means that if the levy was set at zero, no future levy could be raised. The Government has indicated that it will relax these restrictions, possibly in the upcoming Pension Schemes Bill. The revised PPF rules include provisions to allow the levy to be reduced to zero if the necessary legislative changes are brought forward.

The PPF will be flexible regarding the timing of invoicing to allow time for the situation on the Government’s changes to become clear. An update on expectations for invoicing will be provided by the end of September at the latest.

Other changes this year include: updates to the rules on incorporating deficit reduction contributions in levy calculations, making a simplified approach available to all schemes; and ‘business-as-usual’ updates to the levy methodology to reflect latest market conditions. The Policy Statement notes that the PPF has updated its levy waiver guidance to clarify when waivers can be applied for in the context of buy-ins. The PPF will consider waiver applications related to a full buy-in and schemes are encouraged to contact them to discuss their particular circumstances.

Read the Policy Statement.

Read the Levy Rules.

Read the PPF press release.

Read the DWP press release.

PLSA stewardship and voting guidelines 2025

The Pensions and Lifetime Savings Association (PLSA) has published its latest Stewardship and Voting Guidelines for pension scheme trustees. This year’s Guidelines focus on:

• Recent political and economic events that have a direct impact on stewardship issues for investors
• The impact on shareholder rights caused by changes to the UK listings rules and AI developments
• Sustainable finance developments
• Social factor developments
• Workforce developments, including issues such as maternity and paternity pay and leave policies, and ethnicity and disability pay reporting.

Read the Stewardship and Voting Guidelines here.

Pensions academy online - March 11 and 13, 2025: Registration open

Our next Pensions Academy Online webinars will take place on Tuesday March 11 and Thursday March 13. Each webinar begins at 9.30am and will last approximately one hour. You can sign up for the sessions here.

• Cyber risks and mitigations in the pensions world – Tuesday March 11: members of our specialist cyber team will share insights on mitigating the risks (and, in the worst case scenario, dealing with the aftermath) of cyber breaches. How can pension scheme trustees be better equipped to deal with this pervasive and ever-evolving threat?
• Legal update – Thursday March 13: we’ll round up all the latest developments and outline what’s on the pensions horizon.