A bite-sized summary of recent UK pension news
Welcome to our latest update, in which we cover:
Pension Schemes Bill: what next?
- Following Parliament’s Easter recess, the Bill will start “Ping Pong” between the Commons and the Lords;
Inheritance tax (IHT) and pensions: government response
- The government explains next steps and expected timings for regulations and guidance;
Virgin Media: Pensions Regulator (TPR) guidance
- TPR guidance for trustees on using the “potentially remediable alteration” remedy under the Pension Schemes Bill;
Release of surplus: discretionary increases
- The Pensions Minister has commented on further calls for action in relation to use of surplus;
High Court decision: an employment transfer and subsequent redundancy does not trigger the early payment of deferred benefits
- The High Court considers the regulatory context when determining whether a member is entitled to take early retirement benefits following an employment transfer and subsequent redundancy;
Pensions Regulator (TPR): blog and guidance on consolidation into a Master Trust
- TPR encourages small defined contribution (DC) schemes to consider consolidation or winding up;
Pensions Administration Standards Association (PASA): Part 4 of its Trustee-Administrator Lifecycle Series
- The Pensions Administration Standards Association (PASA) has published Part 4 of its Trustee-Administrator Lifecycle Series, together with an "oversight scorecard";
HMRC Pensions Newsletter 179
- HMRC’s latest newsletter with an update on digitalisation of relief at source.
Pension Schemes Bill: what next?
On 26 March 2026, the Pension Schemes Bill completed its passage through the House of Lords with Third Reading. A number of minor consequential amendments were passed at this stage but, as is usual, no significant changes were made.
The Bill’s next step is for the House of Commons to consider amendments made by the Lords (including several noteworthy changes made on Report – please see our Digest of 27 March 2026). Any changes made by the Commons will then be passed back to the Lords, in the process known as “Ping Pong”.
In the debate at Third Reading, the Minister of State (Baroness Sherlock) noted the Lord’s rejection of the government’s proposed new clause which would have required the Secretary of State to issue statutory guidance on investment powers and duties. The Minister commented that “The Government remain[s] committed to improving clarity around trustees’ existing investment duties, including how schemes consider long-term and financially material factors such as climate and systemic risks, while maintaining their core duty to act in members’ best interests.”.
The Minister stated that the government is currently reviewing “next step options” to ensure the objective of providing clarity for trustees on investment matters can be progressed.
The latest version of the Bill, as amended by the House of Lords on Report is available here.
Inheritance tax: government response
HM Treasury has responded to the report of the House of Lords Economic Affairs Committee on measures to change the inheritance tax (IHT) treatment of unused pension funds (and agricultural and business property reliefs). The government has accepted nine of the Lords’ recommendations and partially accepted a further 31.
As a reminder, the changes to IHT on unused pension funds will apply for deaths on or after 6 April 2027. Recent changes to the provisions governing IHT and pensions are explained in our Digest of 6 March 2026.
Points to note include the following.
Deadlines for payment of IHT
- The government rejected calls to extend the deadline for payment of IHT on pension assets to 12 months after death. The government also refused to suspend interest and penalties for a transitional period.
- IHT on pension assets will therefore be subject to the same rules as for a deceased’s general estate: IHT will fall due at the end of the sixth month after the date of death, with interest accruing on any IHT unpaid after this date.
- Penalties will apply if the IHT account is submitted more than 12 months after the month of death, or three months from the appointment of personal representatives (PRs) if later, unless there is reasonable excuse for the delay.
- Where there are insufficient liquid assets to pay the IHT due on time, PRs may be able to apply to postpone the initial payment and to obtain a grant of probate on credit.
Information exchange between PRs and pension schemes
- The government will consult on regulations in Spring this year, setting out the requirements for information exchange between PRs and pension scheme administrators (PSAs) for IHT purposes. PSAs must provide PRs with the information needed within prescribed timescales. The regulations are expected to be finalised and made in Spring/Summer 2026 and to come into effect on 6 April 2027.
- HMRC will issue guidance, a template for PSAs, and interactive tools for PRs. Draft guidance will be shared with industry stakeholders in Autumn/Winter 2026. Final guidance and supporting materials are expected in Spring 2027.
- The guidance will include details of the evidence PSAs should request to confirm PRs’ identities and status regarding the deceased member. This will be particularly important where a member has died intestate (without a will) and a family member claims that s/he is a “potential PR”. PRs and potential PRs may issue a “withholding notice”, prohibiting the PSA from paying out more than 50% of death benefits.
Valuation of illiquid assets
- Where PRs are unable to discover the exact value of an asset in an estate, HMRC already permits the use of estimated values, with an updated account to be provided when the correct value is known. HMRC will update its guidance to cover pension assets.
Locating a deceased’s pension arrangements
- The government will issue guidance for PRs on the steps they are expected to take to locate an individual’s pensions. Some of the guidance may be included in newsletters in Spring 2026. The government response suggested that PRs may identify a deceased’s pension schemes by examining the deceased’s paperwork and seeking information from friends, family and any professional advisers of the deceased.
- The government rejected calls for pensions dashboards to be searchable by PRs, or for them to return data on pensions in payment or drawdown.
- The government also explained that the technical infrastructure of its “Tell us Once” service cannot currently be extended to private sector pensions. (The service enables relatives to notify a death only once, with information then shared across other government services and some public sector pension schemes.)
Communication of changes
- The government plans to publicise the changes to impacted groups with communication exercises in Winter 2026/Spring 2027.
- The government will work with the pensions industry to develop accessible communications which may be sent to scheme members.
The Minister’s remarks were made in the House of Commons Adjournment debate on 19 March 2026.
Virgin Media: guidance from the Pensions Regulator
The Pensions Regulator (TPR) has issued guidance for trustees on using the “potentially remediable alteration” (PRA) remedy under the Pension Schemes Bill, where the validity of previous amendments is in doubt following the judgments in the Virgin Media case.
TPR’s guidance follows guidance issued by the Financial Conduct Authority (FCA) in January 2026. For more details of the PRA remedy, the guidance from TPR and the FRC, plus a reminder of why the decision in the Virgin Media case has prompted the government to introduce the remedy, please see our updated briefing note.
Release of surplus: discretionary increases
The Pensions Minister, Torsten Bell, responded to further calls for government action in relation to use of surplus and discretionary increases for pre-97 benefits, by saying the following.
- Under the surplus provisions in the Pension Schemes Bill, trustees will be entitled to insist on discretionary pre-97 indexation as a condition for surplus release, if they so wish.
- Whatever scheme rules provide, the Minister considered that there was “no excuse” for employers not to engage fully with trustees on decisions and questions about use of surplus. The government will consider what more can be done to ensure “open consultation” and clarity about what is going on and how decisions are taken.
- The Pensions Regulator (TPR) has been considering how to gather evidence about decisions on surplus, particularly circumstances in which defined benefit (DB) schemes are in surplus and the employer refuses to consent to discretionary increases. The Minister intends to talk to TPR in the “weeks and months ahead” about what more could be done.
High Court holds that an employment transfer and subsequent redundancy does not trigger the early payment of deferred benefits
In McKavney v Serco [2026] EWHC 508, the High Court upheld a Pensions Ombudsman (TPO) determination in relation to a complaint brought by a member of the Serco Pension and Life Assurance Scheme (SPLAS), who was also a "protected person" within the meaning of the Electricity (Protected Persons) (England and Wales) Pensions Regulations 1990 (the PPR).
The case demonstrates the courts' approach to constructing pension scheme rules against the background of a statutory protection regime and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (the TUPE Regulations).
Background
Mr McKavney was a former member of the Electricity Supply Pension Scheme (ESPS) and was a "protected person" within the meaning of the PPR. This meant that Mr McKavney benefited from certain pension protections on the transfer of his employment.
Mr McKavney's contract of employment was transferred to the Serco Group Plc (Serco) in 2005; and then from Serco to a subsidiary of AMEC Foster Wheeler PLC (AMEC) in 2012. Both employment transfers were so-called "TUPE transfers" (that is Mr McKavney's employment transferred automatically under the TUPE Regulations).
Following the first TUPE transfer, Mr McKavney transferred his pension benefits from the ESPS into the SPLAS. On the second TUPE transfer, Mr McKavney became a deferred member of the SPLAS, and an active member of the AMEC scheme for future service.
On his redundancy at age 56 from AMEC in 2015, Mr McKavney received an immediate unreduced pension from the AMEC scheme in respect of his service from 2012, but was told that he could not take early payment of his deferred protected pension under the SPLAS.
Mr McKavney brought a complaint to TPO, arguing that he was entitled to the immediate unreduced payment of his SPLAS benefits under certain specific provisions in the scheme's rules. This entitlement arose either when his employment transferred to AMEC in 2012, or following his redundancy in 2015, as these events constituted "compulsory retirement from Service" or "Service" ending "due to redundancy or a reorganisation of the Employer's business".
TPO disagreed with Mr McKavney's interpretation of the SPLAS rules and rejected his complaint. TPO also concluded that Mr McKavney could not have “retired” on his transfer of employment, given that his contract of employment with Serco was not terminated by the TUPE transfer; instead it continued as if it had originally been made with his new employer.
High Court decision
The High Court rejected Mr McKavney's appeal against TPO's determination. The central issue was again the interpretation of specific provisions in the SPLAS rules.
The court noted that the "starting point" for ascertaining the correct construction of the rules was the language of the relevant rules themselves, "in light of" the member's rights under the PPR. The relevant section of the SPLAS rules was explicit in stating that it was intended to meet the PPR's requirements. The Judge commented that, "in the same way that it will often be necessary to construe a pension scheme against its fiscal background, it was also necessary to have regard to the requirements of the PPR" in construing the relevant SPLAS rules.
The Judge further commented that "any construction of those [rules] which cuts across the protections given to protected employees by the PPR is unlikely to be the correct one unless it is apparent that the language must have some other meaning".
The Judge also agreed with TPO's conclusion that continuity of employment under TUPE meant that Mr McKavney was not "retired" or made "redundant" on either TUPE transfer.
Implications
The case involved the interpretation of specific scheme rules.
However, it demonstrates that the courts' construction may be informed by any applicable statutory protections, especially where the purpose of those rules is expressly stated to be to give effect to those protections.
This decision also suggests that the courts are unlikely to treat a TUPE transfer as constituting a retirement, redundancy or reorganisation that would trigger entitlement to early pension benefits – unless there was specific wording to the contrary in the scheme rules.
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Pensions Regulator: guidance and call for action on consolidation
The Pensions Regulator (TPR) has released a blog, urging trustees of small defined contribution (DC) schemes to consider whether they can realistically meet the new legal and administrative requirements being introduced under the Pension Schemes Bill.
TPR flags in particular the new obligations on DC scheme trustees to:
- Provide default retirement solutions;
- Carry out value for money (VFM) assessments; and
- Facilitate transfers of dormant small pots to a small pot consolidator.
To help trustees of small DC schemes, TPR has issued new guidance on consolidating into a Master Trust and has updated its guidance on winding up a DC scheme.
The Pensions Administration Standards Association publishes Part 4 of its Trustee-Administrator lifecycle series
The Pensions Administration Standards Association (PASA) has published the Part 4 of its Trustee-Administrator Lifecycle Series and an accompanying "oversight scorecard".
A summary of Parts 1 to 3 of the series is outlined in our Digest of 27 March.
Part 4 focuses on building and maintaining an effective trustee/administrator partnership and highlights the importance of open dialogue, proportionate governance and a focus on long-term outcomes. It lists a range of areas that trustees and administrators may wish to include in a governance framework, which they can tailor to their scheme.
The scorecard provides a practical, structured framework to support trustee oversight of administration performance. It covers four key perspectives: financial, stakeholder, internal processes and learning/growth. It can be adapted to reflect the size, complexity and priorities of individual schemes; the intention being to allow trustees to select the measures most relevant to their needs.
HMRC Pensions Newsletter 179
On 27 March 2026, HMRC issued Newsletter 179. Points to note include the following:
- A reminder that the members’ protections and enhancements may now be checked through the Managing Pensions service.
- An update on HMRC’s Digitalisation of Relief at source, with the introduction of HMRC’s strategic payment service expected in summer 2026.
- A reminder that from 6 April 2026 all pension scheme administrators of UK registered pension schemes will need to be UK resident.
- A new double taxation agreement between the UK and Luxembourg will change the taxation of some payments from UK pensions to individuals resident in Luxembourg.
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