Pension Schemes Bill

A Bill to make provision about pension schemes; and for connected purposes.

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This is the latest version of the Bill

Available Versions

5 Dec 2025
Lords: Committee
HL Bill 152 (as brought from the Commons)
(0 amendments - 0 agreed)
18 Sep 2025
Commons: Report
Bill 304 2024-26 (as amended in Public Bill Committee)
No digital version of this Bill was published by Parliament
Date Debate
Wednesday 3rd December 2025 Report stage
5 Jun 2025
Commons: Committee
Bill 255 2024-25 (as introduced)
(326 amendments - 251 agreed)
Date Debate
Thursday 11th September 2025 Committee stage: 8th sitting
Thursday 11th September 2025 Committee stage: 7th sitting
Tuesday 9th September 2025 Committee stage: 6th sitting
Tuesday 9th September 2025 Committee stage: 5th sitting
Thursday 4th September 2025 Committee stage: 4th sitting
Thursday 4th September 2025 Committee stage: 3rd sitting
Tuesday 2nd September 2025 Committee stage: 1st sitting
Tuesday 2nd September 2025 Committee stage: 2nd sitting

Relevant Documents

Bill PDF
HL Bill 152 (as brought from the Commons)
Explanatory Note
HL Bill 152 Explanatory Notes
Impact Assessment
Summary Impact Assessment from the Department for Work and Pensions

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Page 1

Part 1

 

Defined benefit pensions

 

Chapter 1

 

Local government pension schemes

 
"Asset pool companies"

Source HL Bill 152 Explanatory Notes

61. Clause 1 defines asset pool companies and contains provisions relating to the use of asset pool companies in pension schemes for local government workers. The Secretary of State is the responsible authority for making regulations for the Local Government Pension Scheme (LGPS) for England and Wales, Scottish Ministers are the responsible authority for the LGPS in Scotland.

62. Subsection (1) allows for scheme regulations for the LGPS to include provision about asset pool companies and the participation of LGPS administering authorities, who are scheme managers for the purpose of the LGPS, in asset pool companies.

63. Subsection (2) sets out what may be included in the regulations made under subsection 1. Regulations may:

  • Specify things that administering authorities must do or must not do;
  • Allow the responsible authority, in prescribed circumstances, to require an LGPS administering authority to participate in a particular asset pool or cease to participate in a particular asset pool;
  • Where an administering authority is directed to participate or cease to participate in an asset pool company, the responsible authority may also direct the relevant asset pool company(s) or their participating administering authorities to take the necessary steps to enable the administering authority to comply with that direction;
  • Specify things that asset pool companies must do or must not do;
  • Allow or require the responsible authority to issue guidance to asset pool companies;
  • Allow the responsible authority to direct an asset pool company to comply with guidance, in the event that the responsible authority is satisfied that it is failing to do so without good reason, and to direct the manner in which it exercises its investment management functions.

64. Subsection (3) sets out definitions of the terms 'specified' and 'investment management activities' used for the purposes of subsection (2).

65. Subsection (4) requires that prior to issuing a direction under section 1(2)(b) or (c) the responsible authority must consult the relevant administering authority, the relevant asset pool company and its participating administering authorities, and any other person the responsible authority considers should be consulted.

66. Subsection (5) requires that prior to issuing a direction under section 1(2)(e) the responsible authority must consult the relevant asset pool company, the administering authorities participating in the asset pool company, the Financial Conduct Authority (FCA), and any other person that the responsible authority considers should be consulted.

67. Subsection (6) sets out that regulations pertaining to section 1(2)(a) may, among other things:

  • Require administering authorities to participate in an asset pool company and for the assets for which they are responsible to be managed by that asset pool company;
  • Prohibit administering authorities from participating in more than one asset pool company at any one time (subject to any transitional arrangements that may apply where an administering authority decides to stop participating in one asset pool company and begin participating in another);
  • Require administering authorities to take steps to ensure their asset pool company is authorised by the FCA.

68. Subsection (7) sets out that regulations pertaining to section 1(2)(d) may include a requirement for asset pool companies to take steps to be authorised by the FCA.

69. Subsection (8) clarifies that, in subsections (6)(c) and (7), the ‘activities' those of a kind that an asset pool company could carry out and would also require FCA authorisation.

70. Subsection (9) clarifies that, for the purpose of Chapter 1, asset pool companies are defined as companies, limited by shares and registered in the United Kingdom, that are established for the purpose, whether exclusively or in part, of managing the funds and other assets of their participating administering authorities, and making and managing investments on behalf of those administering authorities either directly or through one or more collective investment vehicles. This subsection also clarifies that an asset pool company must be owned only by administering authority shareholders or be wholly owned by a company whose shareholders consist only of administering authorities. Administering authorities may participate in an asset pool company either by being a shareholder of the asset pool company or a company that owns the asset pool company, or by contracting with the asset pool company as a client.
1
Asset pool companies
5
 
(1)
Scheme regulations relating to a scheme for local government workers which
 
 
has pension funds may make provision about, or in connection with, asset
 
 
pool companies and participation in asset pool companies by the scheme
 
 
managers.
 
 
(2)
The provision which may be made under subsection (1) includes provision—
10
 
(a)
imposing requirements or prohibitions on scheme managers;
 
 
(b)
enabling the responsible authority, in prescribed circumstances, to
 
 
give a direction to a scheme manager requiring the manager—
 
 
(i)
to participate in an asset pool company specified in the
 
 
direction, or
15
 
(ii)
to cease to participate in an asset pool company so specified;
 
 
(c)
enabling the responsible authority, in prescribed circumstances, to
 
 
give a direction to an asset pool company specified in the direction,
 
 
or to all or any of its participating scheme managers, requiring the
 
 
company or scheme managers concerned—
20
 
(i)
to take any steps specified in the direction with a view to
 
 
enabling or securing compliance by a scheme manager with a
 
 
direction requiring it to participate in, or to cease to participate
 
 
in, the company (see paragraph (b) ), and
 

Page 2

 
(ii)
to take any other steps necessary to enable or secure compliance
 
 
with such a direction;
 
 
(d)
imposing requirements or prohibitions on asset pool companies;
 
 
(e)
enabling or requiring the responsible authority to issue guidance to
 
 
asset pool companies;
5
 
(f)
enabling the responsible authority, in prescribed circumstances, to
 
 
give a direction to an asset pool company—
 
 
(i)
requiring it to comply with guidance issued as mentioned in
 
 
paragraph (e) (where the responsible authority is satisfied that
 
 
it is failing, or has failed, to do so without good reason),
10
 
(ii)
as to the manner in which it is to carry out any specified
 
 
investment management activities.
 
 
(3)
In subsection (2) (f) (i) and (ii) —
 
 
“specified” means specified in the direction;
 
 
“investment management activities” means activities involved in or
15
 
connected with the management of funds and other assets.
 
 
(4)
If provision is made under subsection (2) (b) or (c) , the scheme regulations
 
 
must require the responsible authority to consult the following persons before
 
 
a direction is given in respect of the participation of a scheme manager in an
 
 
asset pool company, namely—
20
 
(a)
the scheme manager;
 
 
(b)
the asset pool company;
 
 
(c)
the scheme managers participating in the asset pool company;
 
 
(d)
any other person the responsible authority considers it appropriate to
 
 
consult.
25
 
(5)
If provision is made under subsection (2) (e) for the giving of directions to an
 
 
asset pool company, the scheme regulations must require the responsible
 
 
authority to consult the following persons before a direction is given, namely—
 
 
(a)
the asset pool company;
 
 
(b)
the scheme managers participating in the asset pool company;
30
 
(c)
the Financial Conduct Authority;
 
 
(d)
any other person the responsible authority considers it appropriate to
 
 
consult.
 
 
(6)
Scheme regulations making provision mentioned in subsection (2) (a) may
 
 
(among other things)—
35
 
(a)
require a scheme manager to participate in an asset pool company
 
 
with a view to that company managing the funds and other assets of
 
 
the scheme for which the scheme manager is responsible;
 
 
(b)
prohibit a scheme manager from participating in more than one asset
 
 
pool company at the same time (subject to any transitional
40
 
arrangements permitted by the regulations where a scheme manager
 
 
participating in one company decides to participate instead in another
 
 
company);
 

Page 3

 
(c)
require the scheme managers for the time being participating in an
 
 
asset pool company to take steps to secure the grant of FCA
 
 
authorisation to the company for carrying out prescribed activities.
 
 
(7)
Scheme regulations making provision mentioned in subsection (2) (d) may
 
 
(among other things) require an asset pool company to take steps to secure
5
 
the grant of FCA authorisation to the company for carrying out prescribed
 
 
activities.
 
 
(8)
In subsections (6) (c) and (7) —
 
 
“activities” means activities which—
 
 
(a)
are activities of a kind that an asset pool company could carry
10
 
out, and
 
 
(b)
require FCA authorisation;
 
 
“FCA authorisation” means authorisation by the Financial Conduct
 
 
Authority under the Financial Services and Markets Act 2000;
 
 
(9)
For the purposes of this Chapter—
15
 
(a)
“asset pool company” means a company limited by shares and
 
 
registered in the United Kingdom which is established for purposes
 
 
consisting of or including—
 
 
(i)
managing funds or other assets for which its participating
 
 
scheme managers are responsible, and
20
 
(ii)
making and managing investments on behalf of those scheme
 
 
managers (whether directly or through one or more collective
 
 
investment vehicles),
 
 
and whose shares are all held by scheme managers only or by another
 
 
company limited by shares and registered in the United Kingdom
25
 
whose shares are all held by scheme managers only, and
 
 
(b)
a scheme manager participates in an asset pool company by—
 
 
(i)
being a shareholder of the company,
 
 
(ii)
being a shareholder in another company which is the only
 
 
shareholder of the company, or
30
 
(iii)
contracting with the company for it to manage the funds and
 
 
other assets for which the scheme manager is responsible.
 
"Asset management"

Source HL Bill 152 Explanatory Notes

71. Clause 2 contains provisions relating to asset management in the LGPS, including setting out the respective roles of administering authorities and asset pool companies in setting and implementing an investment strategy for LGPS funds and assets.

72. Subsection (1) requires scheme regulations made under the Public Service Pensions Act 2013 that make provision about asset pool companies to include provision about the management of LGPS funds and assets.

73. Subsection (2) stipulates that these regulations must require (among other things):

  • That that each administering authority sets, publishes and maintains an investment strategy;
  • That the funds and assets for which an administering authority is responsible (apart from where this is money needed for making payments under the scheme) are held by the asset pool company in which that administering authority participates, subject to any transitional arrangements permitted by regulations, and properly managed for the purposes of the asset pool company implementing the investment strategy set by the administering authority;
  • That administering authorities in England and Wales, with the exception of the Environment Agency, co-operate with strategic authorities (defined for these purposes in subsection (5) as the Greater London Authority, Combined Authorities, Combined County Authorities, and (in areas where there are none of these authorities) prescribed authorities in England, and Corporate Joint Committees in Wales) in order to identify and develop investment opportunities.

74. Subsection (3) relates to the formulation of investment strategies by administering authorities and specifies that the regulations that may be made under subsection (1) include provision about where administering authorities must or may take advice from when developing their investment strategies, and the matters that must or may be covered by those investment strategies.

75. Subsection (4) further clarifies that the matters that must or may be covered by an investment strategy include the approach of the administering authority to responsible investment and to local investments, and a strategic asset allocation or a target range for growth and income.

76. Subsection (5) defines the terms investment strategy, local investments and strategic authorities for the purposes of this clause.
2
Asset management
 
 
(1)
Where scheme regulations relating to a scheme for local government workers
 
 
make provision under section 1 (1) , the regulations must make provision about
35
 
the management of the funds and other assets for which the scheme managers
 
 
are responsible.
 
 
(2)
The provision made by virtue of subsection (1) must include provision for
 
 
securing that (among other things)—
 
 
(a)
each scheme manager formulates, publishes and keeps under review
40
 
an investment strategy,
 

Page 4

 
(b)
the funds or other assets for which a scheme manager is
 
 
responsible (other than money needed for making payments under
 
 
the scheme from the pension fund maintained by that scheme manager)
 
 
are—
 
 
(i)
held on behalf of the scheme manager by an asset pool
5
 
company in which the scheme manager participates (subject
 
 
to any transitional arrangements permitted by the regulations
 
 
in relation to the transfer of funds or assets to the company),
 
 
and
 
 
(ii)
properly managed by that company with a view to
10
 
implementing the scheme manager’s investment strategy, and
 
 
(c)
in the case of a scheme for local government workers for England and
 
 
Wales, each scheme manager (other than the Environment Agency)
 
 
co-operates with an appropriate strategic authority to identify and
 
 
develop appropriate investment opportunities.
15
 
(3)
The provision made by virtue of subsection (1) may include, in particular,
 
 
provision about—
 
 
(a)
sources of advice that a scheme manager must, or may, use in
 
 
formulating its investment strategy, and
 
 
(b)
matters that must, or may, be covered by an investment strategy.
20
 
(4)
The matters referred to in subsection (3) (b) include—
 
 
(a)
the scheme manager’s approach to responsible investment,
 
 
(b)
the scheme manager’s approach to local investments, and
 
 
(c)
strategic asset allocation or target ranges for growth and income.
 
 
(5)
In this section—
25
 
“investment strategy” means a statement of a scheme manager’s
 
 
objectives, priorities and preferences in relation to the investment of
 
 
the funds and other assets for which it is responsible;
 
 
“local investments” , in relation to a scheme manager, means investments
 
 
in, or for the benefit of persons living or working in—
30
 
(a)
the scheme manager’s area, or
 
 
(b)
the areas of the other scheme managers participating in the
 
 
same asset pool company as the scheme manager;
 
 
“strategic authorities” means—
 
 
(a)
the Greater London Authority,
35
 
(b)
a combined authority in England established under section 103
 
 
of the Local Democracy, Economic Development and
 
 
Construction Act 2009,
 
 
(c)
a combined county authority in England established under
 
 
section 9(1) of the Levelling-up and Regeneration Act 2023,
40
 
(d)
any other local authority in England of a description prescribed
 
 
for the purposes of this paragraph in scheme regulations, and
 

Page 5

 
(e)
a corporate joint committee in Wales established by regulations
 
 
under Part 5 of the Local Government and Elections (Wales)
 
 
Act 2021 (asc 1).
 
"Additional powers for certain scheme managers"

Source HL Bill 152 Explanatory Notes

77. Clause 3 allows regulations to grant powers to those LGPS administering authorities in England and Wales that do not have the full suite of local authority powers (such as stand-alone pension authorities) in order to bring their powers into line with those that can be exercised by other administering authorities. The powers that may be granted are to provide services to other scheme managers and to take part in joint committees.

78. Subsection (2) makes provisions for administering authorities to be granted the same powers as a local authority under Part 6 of the Local Government Act 1972 when carrying out functions as a scheme manager. Part 6 relates to how local authorities discharge their functions, and in particular includes powers to form joint committees or to arrange for functions to be discharged by another authority.

79. Subsection (3) outlines that the powers to make provisions under subsection (2) cannot be used to the extent that the administering authority already has the powers of a local authority under Part 6 of the Local Government Act 1972.

80. Subsection (4) makes provision for administering authorities to be granted the power to provide any administrative, professional or technical service to other scheme managers for public service pension schemes.

81. Subsection (5) defines a “public service pension scheme

3
Additional powers for certain scheme managers
 
 
(1)
Scheme regulations may make provision for the purpose of conferring any
5
 
power or powers falling within subsection (2) or (4) on a specified scheme
 
 
manager for a scheme for local government workers in England and Wales.
 
 
(2)
Scheme regulations under this section may make provision conferring on the
 
 
scheme manager (in relation to carrying out its functions as a scheme
 
 
manager)—
10
 
(a)
any specified power or powers of a local authority under Part 6 of
 
 
the Local Government Act 1972, or
 
 
(b)
any power or powers corresponding to one or more of the powers of
 
 
a local authority under that Part.
 
 
(3)
The power to make provision by virtue of subsection (2) is not exercisable if,
15
 
or to the extent that, the scheme manager already has the powers of a local
 
 
authority under Part 6 of the Local Government Act 1972 (otherwise than by
 
 
virtue of scheme regulations under this section).
 
 
(4)
Scheme regulations under this section may make provision conferring on the
 
 
scheme manager (as part of its functions as a scheme manager) power to
20
 
provide any administrative, professional or technical service for any other
 
 
person who is a scheme manager for a public service pension scheme.
 
 
(5)
In subsection (4) —
 
 
(a)
“public service pension scheme” means a scheme for the payment of
 
 
pensions and other benefits to or in respect of persons of a description
25
 
set out in section 1(2) of PSPA 2013, and
 
 
(b)
“scheme manager” (in the third place it appears) means any person
 
 
who is, for the purposes of PSPA 2013, a scheme manager for any
 
 
such scheme.
 
 
(6)
The power to make provision by virtue of subsection (4) is not exercisable if,
30
 
or to the extent that, the scheme manager already has the power to provide
 
 
services referred to in that subsection (otherwise than by virtue of scheme
 
 
regulations under this section).
 
 
(7)
Scheme regulations under this section may amend or modify any Act passed
 
 
before or in the same Session as this Act.
35
 
(8)
In this section “specified” means specified in scheme regulations under this
 
 
section.
 

Page 6

4
Exemption from public procurement rules
 
 
(1)
After paragraph 2 of Schedule 2 to the Procurement Act 2023 (general vertical
 
 
arrangements exemption from public procurement rules) insert—
 
 
“2A
(1)
A contract between a local government pension scheme manager
 
 
and an asset pool company providing for the company—
5
 
(a)
to manage the funds and other assets for which the scheme
 
 
manager is responsible,
 
 
(b)
to make and manage investments on behalf of the scheme
 
 
manager, and
 
 
(c)
if the contract so provides, to carry out other investment
10
 
management activities for or on behalf of the scheme
 
 
manager,
 
 
if each of the conditions set out in sub-paragraph (2) is met.
 
 
(2)
The conditions are—
 
 
(a)
that more than 80% of the activities of the company are
15
 
investment management activities carried out for or on behalf
 
 
of local government pension scheme managers;
 
 
(b)
that no person exercises a decisive influence on the activities
 
 
of the company (either directly or indirectly) other than—
 
 
(i)
the participating scheme managers in the company,
20
 
acting in their capacity as local government pension
 
 
scheme managers, and
 
 
(ii)
where the only shareholder in the company is another
 
 
company (see section 1 (9) (a) of the Pension Schemes
 
 
Act 2025), that other company;
25
 
(c)
that the company does not carry out any activities that are
 
 
contrary to the interests of—
 
 
(i)
the participating scheme managers in the company,
 
 
in their capacity as local government pension scheme
 
 
managers, or
30
 
(ii)
where the only shareholder in the company is another
 
 
company, that other company.
 
 
(3)
The contracts covered by this paragraph include a contract where
 
 
the local government pension scheme manager concerned is already
 
 
a participating scheme manager in the company (as well as one
35
 
where the scheme manager concerned will become a participating
 
 
scheme manager in the company as a result of entering into it).
 
 
(4)
An appropriate authority may by regulations make provision about
 
 
how a calculation as to the percentage of activities carried out by
 
 
an asset pool company is to be made for the purposes of
40
 
sub-paragraph (2) (a) .
 
 
(5)
For the purposes of sub-paragraph (2) (b) , a person does not exercise
 
 
a decisive influence on the activities of the asset pool company only
 
 
by reason of—
 

Page 7

 
(a)
being a director, officer or manager of the company, acting
 
 
in that capacity, or
 
 
(b)
where the only shareholder in the company is another
 
 
company, being a director, officer or manager of that other
 
 
company.
5
 
(6)
In this paragraph—
 
 
“asset pool company” has the meaning given by section 1 (9) (a)
 
 
of the Pension Schemes Act 2025 ;
 
 
“investment management activities” means activities involved
 
 
in or connected with the management of funds or other
10
 
assets for which a scheme manager is responsible (including
 
 
making and managing investments on behalf of the scheme
 
 
manager);
 
 
“local government pension scheme manager” means a person
 
 
who is, by virtue of section 4(5) of the Public Service
15
 
Pensions Act 2013, a scheme manager for a pension scheme
 
 
for local government workers in England and Wales;
 
 
“participating scheme manager” , in relation to an asset pool
 
 
company, means a local government pension scheme
 
 
manager who participates in the company within the
20
 
meaning of section 1 (9) (b) of the Pension Schemes Act 2025.”
 
5
Scheme manager governance reviews
 
 
(1)
Scheme regulations relating to a scheme for local government workers which
 
 
has pension funds may make provision for or in connection with—
 
 
(a)
the carrying out of periodic or ad hoc governance reviews of individual
25
 
scheme managers,
 
 
(b)
the issuing by the responsible authority of guidance to persons carrying
 
 
out governance reviews about the carrying out of such reviews, and
 
 
(c)
functions of the responsible authority in response to a report of such
 
 
a review.
30
 
(2)
For this purpose, in relation to any scheme manager—
 
 
(a)
a governance review is a review of the governance of the scheme so
 
 
far as administered by the scheme manager, and the performance and
 
 
effectiveness of the scheme manager, over a period (“the period of
 
 
review”);
35
 
(b)
a periodic governance review is a governance review that is required
 
 
by a provision of scheme regulations to take place—
 
 
(i)
within a prescribed period after the commencement of that
 
 
provision, or
 
 
(ii)
within a prescribed period after the completion of a previous
40
 
governance review,
 
 
in respect of a period of review prescribed by or determined under
 
 
the regulations;
 

Page 8

 
(c)
an ad hoc governance review is a governance review that is required
 
 
by scheme regulations to take place—
 
 
(i)
where a direction to carry out a governance review has been
 
 
given to the scheme manager by the responsible authority (if
 
 
a power to give such a direction has been conferred by the
5
 
regulations), in respect of a period of review specified in the
 
 
direction, or
 
 
(ii)
in prescribed circumstances (other than the passage of time
 
 
since the most recent completed governance review), in respect
 
 
of a period of review prescribed by or determined under the
10
 
regulations.
 
 
(3)
The period of review for the first governance review of a scheme manager
 
 
may include time before the commencement of the regulations providing
 
 
for governance reviews to take place.
 
 
(4)
Scheme regulations which make provision for the carrying out of governance
15
 
reviews must make provision—
 
 
(a)
requiring governance reviews to be carried out independently of the
 
 
scheme manager being reviewed and the responsible authority, but
 
 
under arrangements made by and at the expense of that scheme
 
 
manager;
20
 
(b)
requiring the person carrying out a governance review, as soon as
 
 
practicable after completing the review, to—
 
 
(i)
prepare a report on the review, and
 
 
(ii)
send a copy of the report to the responsible authority and the
 
 
scheme manager being reviewed; and
25
 
(c)
requiring the scheme manager to publish the report.
 
6
Mergers of funds
 
 
In Schedule 3 to PSPA 2013 (scope of scheme regulations: supplementary
 
 
matters), in paragraph 11 (pension funds) at the end insert—
 
 
“In the case of a scheme for local government workers this also
30
 
includes merger (including compulsory merger) of two or more
 
 
separate pension funds.”
 
7
Amendments of 2013 Act relating to scheme regulations
 
 
(1)
PSPA 2013 is amended as follows.
 
 
(2)
In section 3 (scheme regulations)—
35
 
(a)
in subsection (1), after “2022” insert “and Chapter 1 of Part 1 of the
 
 
Pension Schemes Act 2025”, and
 

Page 9

 
(b)
in subsection (2), after paragraph (c) insert—
 
 
“(d)
consequential, supplementary, incidental or transitional
 
 
provision in relation to any provision of Chapter 1 of
 
 
Part 1 of the Pension Schemes Act 2025.””
 
 
(3)
In section 21 (consultation), after subsection (4) insert—
5
 
“(5)
Subsection (1) may be satisfied, in relation to provision contained in
 
 
scheme regulations—
 
 
(a)
made under any provision of Chapter 1 of Part 1 of the Pension
 
 
Schemes Act 2025, or
 
 
(b)
made under section 3(2)(d) above,
10
 
by consultation carried out before, as well as after, the coming into
 
 
force of the provision mentioned in paragraph (a) or of section 7 (2) (b)
 
 
of the Pension Schemes Act 2025 (as the case may be).”
 
8
Interpretation of Chapter 1
 
 
(1)
In this Chapter—
15
 
“asset pool company” has the meaning given by section 1 (9) (a) ;
 
 
“local government worker” has the same meaning as in PSPA 2013 (see
 
 
paragraph 3 of Schedule 1 to that Act);
 
 
“management” and related expressions, in relation to the funds and
 
 
assets of a scheme for local government workers, include (among other
20
 
things)—
 
 
(a)
buying, selling or holding assets;
 
 
(b)
setting asset allocation;
 
 
(c)
establishing and managing pooled investment vehicles;
 
 
(d)
selecting investments;
25
 
(e)
acting as a responsible investor (including by acting as a
 
 
shareholder in an investee company);
 
 
(f)
deciding whether to develop or use internal investment
 
 
management capability or external investment managers;
 
 
(g)
managing cash flow;
30
 
“PSPA 2013” means the Public Service Pensions Act 2013;
 
 
“participates” and related expressions, in relation to an asset pool
 
 
company, are to be interpreted in accordance with section 1 (9) (b) ;
 
 
“prescribed” means prescribed by scheme regulations;
 
 
“the responsible authority” means (in relation to a scheme for local
35
 
government workers in England and Wales or Scotland)—
 
 
(a)
the Secretary of State, in or as regards England and Wales, or
 
 
(b)
the Scottish Ministers, in or as regards Scotland;
 
 
“scheme” means a scheme (within the meaning of PSPA 2013) established
 
 
under section 1 of that Act;
40
 
“scheme manager” , in relation to a scheme for local government workers,
 
 
means a person who is a scheme manager by virtue of section 4(5) of
 

Page 10

 
PSPA 2013 (being a person responsible for the local administration of
 
 
pensions and other benefits payable under the scheme who maintains
 
 
a pension fund for the purposes of providing pensions and other
 
 
benefits under its part of the scheme);
 
 
“scheme regulations” means regulations made under section 1 of PSPA
5
 
2013.
 
 
(2)
A reference in this Chapter to the funds and other assets for which a scheme
 
 
manager is responsible is to the funds and other assets which are (or should
 
 
be) held as part of its pension fund for the purpose of providing pensions
 
 
and other benefits under its part of a scheme for local government workers.
10
 
(3)
Nothing in this Chapter is to be taken as affecting the generality of the powers
 
 
conferred by section 1 or 3(1) of, or any provision of Schedule 3 to, PSPA
 
 
2013.
 

Chapter 2

 

Powers to pay surplus to employer

15
9
Power to modify scheme to allow for payment of surplus to employer
 
 
(1)
In the Pensions Act 1995, before section 37 insert—
 
“36B
Power to modify scheme in relation to payment of surplus to employer
 
 
(1)
​The trustees of a trust scheme may by resolution modify the scheme
 
 
in accordance with subsection (2) or (3) .
20
 
(2)
Where no power is conferred on any person to make payments to the
 
 
employer out of funds held for the purposes of the scheme, the
 
 
resolution may confer a power to do so on the trustees, subject to any
 
 
restrictions specified in the resolution.
 
 
(3)
Where a power is exercisable by the trustees (whether or not by virtue
25
 
of subsection (2) ) to make payments to the employer out of funds held
 
 
for the purposes of the scheme, the resolution may remove or relax
 
 
any restriction imposed by the scheme on the exercise of the power.
 
 
(4)
This section does not apply to a scheme that is being wound up.
 
 
(5)
Any power to distribute assets to the employer on a winding up is to
30
 
be disregarded for the purposes of subsections (2) and (3) ; and a
 
 
resolution under subsection (2) may not confer such a power.
 
 
(6)
The reference in subsection (3) to a restriction imposed by the scheme
 
 
includes a restriction imposed by virtue of a resolution under section
 
 
251 of the Pensions Act 2004 (which was repealed by section 9 (2) of
35
 
the Pension Schemes Act 2025) or this section.
 
 
(7)
Regulations may provide that this section does not apply, or applies
 
 
with prescribed modifications, in prescribed circumstances or to
 
 
schemes of a prescribed description.
 

Page 11

 
(8)
See also section 37 (which limits the circumstances in which a power
 
 
to make payments of surplus may be exercised).”
 
 
(2)
In the Pensions Act 2004, omit section 251 (old resolution procedure in relation
 
 
to payments of surplus).
 
 
(3)
Subsection (2) does not affect the validity of a resolution passed under the
5
 
section it repeals.
 
10
Restrictions on exercise of power to pay surplus
 
 
(1)
Section 37 of the Pensions Act 1995 (restrictions on power to pay surplus to
 
 
employer) is amended in accordance with subsections (2) to (5) .
 
 
(2)
After subsection (2) insert—
10
 
“(2A)
The power referred to in subsection (1)(a) may be exercised only so
 
 
far as permitted by, and only in accordance with, regulations.
 
 
(2B)
Regulations must be made under subsection (2A) —
 
 
(a)
prohibiting the making of a payment unless an actuary of a
 
 
prescribed description (“the relevant actuary”) is satisfied that
15
 
prescribed conditions are met in relation to the value of the
 
 
scheme’s assets and the amount of its liabilities,
 
 
(b)
making provision about the basis (or bases) on which the value
 
 
of the scheme’s assets and the amount of its liabilities are to
 
 
be determined for that purpose,
20
 
(c)
requiring the relevant actuary to give a certificate before a
 
 
payment is made, and
 
 
(d)
requiring members of the scheme to be notified in relation to
 
 
a payment before it is made.
 
 
(2C)
The provision that may be made by regulations under subsection (2A)
25
 
includes provision—
 
 
(a)
about other conditions that must be met in order for the making
 
 
of a payment to be permitted;
 
 
(b)
about the giving of certificates by the relevant actuary,
 
 
including about the form and content of a certificate;
30
 
(c)
prohibiting the making of a payment without the employer’s
 
 
consent;
 
 
(d)
in relation to a superfund scheme (within the meaning of Part
 
 
3 of the Pension Schemes Act 2025)—
 
 
(i)
prohibiting the making of a payment in all
35
 
circumstances;
 
 
(ii)
prohibiting the making of a payment without the
 
 
Authority’s consent.
 
 
(2D)
The power referred to in subsection (1)(a) may not be exercised if
 
 
there is a freezing order in force in relation to the scheme under section
40
 
23 of the Pensions Act 2004.”
 

Page 12

 
(3)
Omit subsections (3) and (4).
 
 
(4)
In subsection (6)(a), for “the requirements of this section” substitute “subsection
 
 
(2A) ”.
 
 
(5)
In subsection (8)—
 
 
(a)
omit “in prescribed circumstances”;
5
 
(b)
after “modifications,” insert “in prescribed circumstances or”.
 
 
(6)
In section 76 (excess assets on winding up), for subsection (8) substitute—
 
 
“(8)
Regulations may provide that this section does not apply, or applies
 
 
with prescribed modifications, in prescribed circumstances or to
 
 
schemes of a prescribed description.”
10
 
(7)
In section 175 of the Pensions Act 1995 (parliamentary control of orders and
 
 
regulations)—
 
 
(a)
in subsection (1), for “(2), (2A) and (3)” substitute “(2) to (3)”;
 
 
(b)
in subsection (2A), after “section” insert “37(2A),”;
 
 
(c)
after subsection (2A) insert—
15
 
“(2B)
Any provision that may be made by regulations or an order
 
 
under this Act subject to the procedure described in subsection
 
 
(1) may instead be made by regulations subject to the procedure
 
 
described in subsection (2).”
 

Part 2

20

Defined contribution pensions

 

Chapter 1

 

Value for money

 
11
Relevant schemes: value for money
 
 
(1)
The Secretary of State may make regulations (“value for money regulations”)
25
 
for the purpose of evaluating, and promoting best practice with regard to,
 
 
the provision of value for money by—
 
 
(a)
prescribed descriptions of relevant pension schemes (“regulated VFM
 
 
schemes”), and
 
 
(b)
prescribed descriptions of arrangements under relevant pension
30
 
schemes (“regulated VFM arrangements”).
 
 
(2)
Value for money regulations may in particular require responsible trustees
 
 
or managers to—
 
 
(a)
make, and publish (in whole or part) reports of, assessments (“VFM
 
 
assessments”) of the performance of—
35
 
(i)
regulated VFM schemes, or
 
 
(ii)
regulated VFM arrangements,
 

Page 13

 
with regard to the provision of value for money in respect of prescribed
 
 
periods (“VFM periods”);
 
 
(b)
notify the Pensions Regulator of any publication they make under
 
 
paragraph (a) ;
 
 
(c)
publish or share with prescribed persons in respect of—
5
 
(i)
regulated VFM schemes or (as the case may be) regulated VFM
 
 
arrangements, and
 
 
(ii)
VFM periods,
 
 
prescribed categories of information (“metric data”) for the purpose
 
 
of enabling VFM assessments to be made (with respect to the scheme
10
 
or arrangement in question and other regulated VFM schemes or
 
 
regulated VFM arrangements).
 
 
(3)
A duty to publish information under subsection (2) (c) may be a duty to
 
 
publish the information for a specified period.
 
 
(4)
Where value for money regulations require responsible trustees or managers
15
 
to make a VFM assessment with respect to a scheme or arrangement, the
 
 
regulations may require those trustees or managers to—
 
 
(a)
assign to the scheme or arrangement, and set out in the VFM
 
 
assessment, a rating for that period (a “VFM rating”), and
 
 
(b)
notify the Pensions Regulator of the rating.
20
 
(5)
Value for money regulations may specify—
 
 
(a)
the method for calculating anything that is to be calculated under the
 
 
regulations;
 
 
(b)
the time at or by which anything required to be done under the
 
 
regulations must be done.
25
 
(6)
In complying with value for money regulations a person must have regard
 
 
to any guidance issued from time to time by the Secretary of State.
 
 
(7)
The Secretary of State must consult with such persons as the Secretary of
 
 
State considers appropriate before—
 
 
(a)
making value for money regulations;
30
 
(b)
issuing guidance under subsection (6) .
 
 
(8)
In this Chapter “responsible trustees or managers” means any of the
 
 
following—
 
 
(a)
trustees or managers of a regulated VFM scheme;
 
 
(b)
trustees or managers of a relevant pension scheme any arrangements
35
 
under which are regulated VFM arrangements.
 
 
(9)
Nothing in this Chapter prejudices the breadth of subsections (1) and (2) .
 
 
(10)
Subject to subsection (11) , value for money regulations are subject to the
 
 
affirmative procedure.
 
 
(11)
Any exercise, after the first, of the power to prescribe categories of information
40
 
by virtue of subsection (2) (c) is subject to the negative procedure.
 

Page 14

 
(12)
Subject to subsection (13) , in this Chapter “relevant pension scheme” means
 
 
an occupational pension scheme that provides money purchase benefits.
 
 
(13)
Value for money regulations may provide that where an occupational pension
 
 
scheme provides money purchase benefits in conjunction with other benefits,
 
 
references in this Chapter (other than this subsection) to the occupational
5
 
pension scheme are to an occupational pension scheme only to the extent that
 
 
it provides money purchase benefits.
 
12
Publication etc of metric data
 
 
(1)
Categories of information prescribed under section 11 (2) (c) may for example
 
 
relate to —
10
 
(a)
the quality of services provided to members of the scheme or (as the
 
 
case may be) arrangement;
 
 
(b)
classes of assets invested in;
 
 
(c)
investment performance;
 
 
(d)
costs incurred by the scheme or (as the case may be) arrangement;
15
 
(e)
charges on members or employers in relation to the scheme or (as the
 
 
case may be) arrangement.
 
 
(2)
Value for money regulations made by virtue of section 11 (2) (c) may—
 
 
(a)
specify time limits within which metric data in respect of a VFM period
 
 
must be published or shared;
20
 
(b)
make provision about the form in which and the means by which
 
 
metric data is to be published or shared;
 
 
(c)
require the published or shared information to deal separately with
 
 
different cohorts of members of the scheme or (as the case may be)
 
 
arrangement;
25
 
(d)
require a person appointed under the regulations to make available,
 
 
for the publication or sharing of metric data, an electronic database
 
 
(operated by that person);
 
 
(e)
require responsible trustees or managers, on publishing or sharing
 
 
any information under regulations made by virtue of section 11 (2) (c)
30
 
, to notify the Pensions Regulator—
 
 
(i)
of the publication of the information and where it is published,
 
 
or
 
 
(ii)
(as the case requires) of the sharing of the information.
 
 
(3)
Value for money regulations made by virtue of section 11 (2) (c) may require
35
 
the Pensions Regulator to—
 
 
(a)
determine the form in which metric data must be published or shared,
 
 
and
 
 
(b)
publish, or share with the Secretary of State and responsible trustees
 
 
or managers, details of the form so specified.
40

Page 15

13
VFM assessments
 
 
(1)
Value for money regulations made by virtue of section 11 (2) (a) may—
 
 
(a)
require responsible trustees or managers to compare (in respect of a
 
 
VFM period) a scheme’s or arrangement’s metric data with—
 
 
(i)
the metric data of a prescribed number (or prescribed minimum
5
 
number) of other schemes or arrangements (“comparator”
 
 
schemes or arrangements) selected by the trustees or managers,
 
 
or
 
 
(ii)
one or more relevant benchmarks;
 
 
(b)
make other provision about the method for comparing and evaluating
10
 
the performance of schemes or arrangements, for example provision
 
 
about—
 
 
(i)
factors that may or must be considered;
 
 
(ii)
criteria to be used in comparing performance;
 
 
(iii)
the use and evaluation of evidence;
15
 
(c)
make provision about how the results of comparisons are to be taken
 
 
into account in making determinations under section 15 (1)
 
 
(determinations for the purposes of assigning ratings);
 
 
(d)
make provision about the eligibility of—
 
 
(i)
relevant pension schemes for selection as comparator schemes;
20
 
(ii)
arrangements under relevant pension schemes for selection as
 
 
comparator arrangements;
 
 
(e)
specify factors that responsible trustees or managers must take into
 
 
account when selecting comparator schemes or comparator
 
 
arrangements.
25
 
(2)
Without prejudice to the breadth of subsection (1) (b) (i) , factors prescribed in
 
 
accordance with that provision may for example include—
 
 
(a)
factors relating to differences in the composition of the membership
 
 
of different schemes or arrangements;
 
 
(b)
special features or characteristics of schemes or arrangements that are
30
 
taken into account in their investment strategies.
 
 
(3)
In this section “relevant benchmark” means—
 
 
(a)
a benchmark specified in value for money regulations;
 
 
(b)
if value for money regulations so provide, a benchmark approved and
 
 
published by the Pensions Regulator.
35
14
Member satisfaction surveys
 
 
(1)
Value for money regulations may—
 
 
(a)
require responsible trustees or managers to—
 
 
(i)
issue VFM member satisfaction survey forms to relevant
 
 
members from time to time as directed by the relevant
40
 
authority;
 

Page 16

 
(ii)
make reports (“survey data reports”) of information returned
 
 
in such forms;
 
 
(b)
provide that survey data reports (or survey data reports that meet
 
 
prescribed conditions) relating to a VFM period are to be regarded as
 
 
metric data for the purposes of this Chapter;
5
 
(c)
require the relevant authority to carry out consultation before issuing
 
 
forms under paragraph (a) ;
 
 
(d)
if regulations are made under paragraph (c) , make provision about
 
 
who must be consulted.
 
 
(2)
In this section—
10
 
“relevant authority” means whichever of the Secretary of State or the
 
 
Pensions Regulator is designated in the regulations as the relevant
 
 
authority;
 
 
“relevant member” means—
 
 
(a)
in relation to a responsible trustee or manager within section
15
 
11 (8) (a) , a member of the relevant pension scheme concerned;
 
 
(b)
in relation to a responsible trustee or manager within section
 
 
11 (8) (b) , a member of an arrangement by virtue of which the
 
 
trustee or manager is a responsible trustee or manager;
 
 
“VFM member satisfaction survey form” means a request, in a form
20
 
approved by the relevant authority, for inviting from relevant members
 
 
information regarding their level of satisfaction with the service
 
 
provided by the scheme or arrangement (as the case requires).
 
15
VFM ratings
 
 
(1)
Responsible trustees or managers who are required by virtue of section 11 (4) (a)
25
 
to assign a VFM rating to a scheme or arrangement in respect of a VFM
 
 
period (the “relevant period”) must assign to the scheme or (as the case
 
 
requires) arrangement—
 
 
(a)
a “fully delivering” rating if the responsible trustees or managers
 
 
determine that the scheme or arrangement is delivering value for
30
 
money;
 
 
(b)
a “not delivering” rating if—
 
 
(i)
the responsible trustees or managers determine that the scheme
 
 
or arrangement is not delivering value for money, and
 
 
(ii)
Condition A, B or C of subsection (2) is met;
35
 
(c)
in any other case, an intermediate rating.
 
 
(2)
For the purposes of subsection (1) (b) (ii) —
 
 
(a)
Condition A is met if the responsible trustees or managers determine
 
 
that there is no realistic prospect of the scheme or (as the case may
 
 
be) arrangement delivering value for money within a reasonable period;
40
 
(b)
Condition B is met if the responsible trustees or managers have
 
 
assigned an intermediate rating to the scheme or arrangement in each
 

Page 17

 
of a prescribed number of VFM periods immediately preceding the
 
 
relevant period;
 
 
(c)
Condition C is met if the Pensions Regulator notifies the responsible
 
 
trustees or managers that the Regulator—
 
 
(i)
considers that the responsible trustees or managers have failed
5
 
to comply with an improvement plan or an action plan relating
 
 
to the scheme or arrangement (and the VFM period), and
 
 
(ii)
does not consider the failures to be so minor that they should
 
 
be ignored.
 
 
(3)
Value for money regulations must specify the number of grades of
10
 
intermediate rating.
 
 
(4)
If value for money regulations provide that there are to be two or more
 
 
intermediate ratings, the regulations—
 
 
(a)
may name each of those ratings;
 
 
(b)
must specify the conditions for assigning each of those ratings.
15
 
(5)
Where, apart from this subsection, a scheme or arrangement would be assigned
 
 
a “not delivering” rating in respect of a VFM period by virtue of Condition
 
 
B of subsection (2) being met, the Pensions Regulator may, if it considers that
 
 
prescribed conditions are met, by notice to the scheme or arrangement
 
 
authorise the responsible trustees or managers to assign to the scheme or
20
 
arrangement (instead of a “not delivering” rating) any intermediate rating
 
 
the Pensions Regulator considers appropriate.
 
 
(6)
In this Chapter “action plan”, in relation to a regulated VFM scheme or
 
 
regulated VFM arrangement, means a plan under section 16 (2) (c) or 17 (1) (a)
 
 
which—
25
 
(a)
sets out the responsible trustees’ or managers’ assessment as to
 
 
whether or not transferring the benefits of the members (under the
 
 
scheme or arrangement) to another scheme or arrangement could
 
 
reasonably be expected to result in the generality of those members
 
 
receiving improved long-term value for money, and
30
 
(b)
proposes measures (or options for measures) for improving the position
 
 
(with regard to value for money) of members or subsets of members
 
 
of the scheme or arrangement.
 
 
(7)
An action plan may not include a proposal to transfer the benefits (under the
 
 
scheme or arrangement) of some or all of the members of that scheme or
35
 
arrangement unless the responsible trustees or managers determine that the
 
 
proposed transfer could reasonably be expected to result in the generality of
 
 
those members receiving improved long-term value for money.
 
 
(8)
Value for money regulations may make further provision about what may
 
 
or must be included in an action plan.
40

Page 18

16
Consequences of an intermediate rating
 
 
(1)
Value for money regulations may make provision about the consequences of
 
 
the assigning under section 15 (1) of an intermediate rating to a regulated
 
 
VFM scheme or regulated VFM arrangement in respect of a VFM period.
 
 
(2)
Without prejudice to the breadth of subsection (1) , value for money regulations
5
 
may require responsible trustees or managers of a scheme or arrangement to
 
 
which any grade of intermediate rating has been assigned to—
 
 
(a)
prepare a plan (an “improvement plan”) specifying actions that the
 
 
responsible trustees or managers propose to take with a view to
 
 
improving the scheme’s or (as the case may be) arrangement’s
10
 
performance with regard to the provision of value for money;
 
 
(b)
provide a copy of the plan to the Pensions Regulator;
 
 
(c)
prepare an action plan and provide a copy of it to the Pensions
 
 
Regulator;
 
 
(d)
give notice in a prescribed format to any person who is a participating
15
 
employer in relation to the scheme or arrangement of—
 
 
(i)
the VFM rating that has effect in relation to the scheme or
 
 
arrangement);
 
 
(ii)
any actions specified by virtue of paragraph (a) in an
 
 
improvement plan;
20
 
(iii)
any actions the trustees or managers consider it is appropriate
 
 
for the employer to take having regard to the rating assigned
 
 
to the scheme or arrangement;
 
 
(e)
ensure that no person becomes an employer in relation to the scheme
 
 
or arrangement for as long as the scheme or (as the case may be)
25
 
arrangement continues to have an intermediate rating;
 
 
(f)
take any other steps that may be prescribed.
 
 
(3)
Value for money regulations may—
 
 
(a)
make further provision about what may or must be included in an
 
 
improvement plan;
30
 
(b)
confer additional functions on the Pensions Regulator in connection
 
 
with schemes that are assigned an intermediate rating.
 
 
(4)
In this section—
 
 
“employer” , in relation to a regulated VFM scheme or regulated VFM
 
 
arrangement, means a person who employs persons who are members
35
 
of the scheme or (as the case requires) arrangement;
 
 
“participating employer” in relation to a regulated VFM scheme or
 
 
regulated VFM arrangement, means an employer who is for the time
 
 
being making contributions to the scheme or (as the case requires)
 
 
arrangement.
40

Page 19

17
Consequences of a “not delivering” rating
 
 
(1)
A regulated VFM scheme or regulated VFM arrangement to which a “not
 
 
delivering” rating has been assigned (an “affected” scheme or
 
 
arrangement) must—
 
 
(a)
prepare an action plan and provide a copy of it to the Pensions
5
 
Regulator;
 
 
(b)
give notice in a prescribed format to any person who is a participating
 
 
employer in relation to the scheme or arrangement of—
 
 
(i)
the VFM rating that has effect in relation to the scheme or
 
 
arrangement);
10
 
(ii)
any actions the trustees or managers consider it appropriate
 
 
for the employer to take having regard to the “not delivering”
 
 
rating;
 
 
(c)
ensure that with effect from the publication of the VFM assessment
 
 
in which the rating is set out no person is to become an employer in
15
 
relation to the scheme or (as the case may be) arrangement;
 
 
(d)
take any other steps that may be prescribed.
 
 
(2)
Where a transfer solution (see subsection (3) ) applies to an affected scheme
 
 
or arrangement, the Pensions Regulator may—
 
 
(a)
require the accrued rights and benefits of all (or a subset of) the
20
 
members of the scheme or arrangement to be transferred to a pension
 
 
scheme (or arrangement under a pension scheme) that—
 
 
(i)
is selected by the responsible trustees or managers, and
 
 
(ii)
meets prescribed conditions;
 
 
(b)
specify conditions that must be met by a scheme or arrangement
25
 
selected under paragraph (a) .
 
 
(3)
For the purposes of subsection (2) , a transfer solution applies to an affected
 
 
scheme or arrangement if—
 
 
(a)
the Pensions Regulator considers that—
 
 
(i)
based on the assessment carried out by the responsible trustees
30
 
or managers under section 15 (6) (a) in the action plan of the
 
 
scheme or arrangement, transferring the benefits of all (or a
 
 
subset of) the members of the scheme or arrangement to
 
 
another pension scheme (or arrangement under a pension
 
 
scheme) could reasonably be expected to result in the generality
35
 
of the members of the scheme or arrangement receiving
 
 
improved long-term value for money, and
 
 
(ii)
any other measures proposed under section 15 (6) (b) in the
 
 
action plan of the scheme or arrangement are unlikely to result
 
 
in its achieving an intermediate (or “fully delivering”) rating
40
 
or substantially improving its performance with regard to the
 
 
provision of value for money, and
 
 
(b)
any prescribed conditions are met.
 
 
(4)
Value for money regulations may make provision—
 

Page 20

 
(a)
about the process for transferring accrued rights and benefits under
 
 
subsection (2) (which may for example include provision for restricting
 
 
or prohibiting administrative costs and as to time limits);
 
 
(b)
conferring on the Pensions Regulator power to direct the trustees or
 
 
managers of the affected scheme to do things permitted or required
5
 
by the regulations;
 
 
(c)
conferring a discretion on the Pensions Regulator;
 
 
(d)
about the winding up of a relevant scheme in circumstances where
 
 
the accrued rights and benefits the members are, or are to be,
 
 
transferred out of the scheme.
10
 
(5)
In this section —
 
 
“employer” has the same meaning as in section 16 ;
 
 
“participating employer” has the same meaning as in section 16 .
 
18
Compliance and oversight
 
 
(1)
Value for money regulations may make provision for ensuring compliance
15
 
with value for money provisions.
 
 
(2)
In this section “value for money provision” means a provision of or made
 
 
under any of sections 11 to 17 .
 
 
(3)
Regulations under subsection (1) may in particular—
 
 
(a)
provide for the Pensions Regulator to issue a notice (a “compliance
20
 
notice”) to a person with a view to ensuring the person's compliance
 
 
with a value for money provision;
 
 
(b)
provide for the Pensions Regulator to issue a notice (a “third party
 
 
compliance notice”) to a person with a view to ensuring another
 
 
person's compliance with a value for money provision;
25
 
(c)
provide for the Pensions Regulator to issue a notice (a “penalty notice”)
 
 
imposing a penalty on a person where the Pensions Regulator is of
 
 
the opinion that the person—
 
 
(i)
has failed to comply with a compliance notice or third party
 
 
compliance notice, or
30
 
(ii)
has contravened a value for money provision;
 
 
(d)
provide for the making of a reference to the First-tier Tribunal or
 
 
Upper Tribunal in respect of the issue of a penalty notice or the amount
 
 
of a penalty;
 
 
(e)
confer other functions on the Pensions Regulator.
35
 
(4)
The regulations may make provision for determining the amount, or the
 
 
maximum amount, of a penalty in respect of a failure or contravention.
 
 
(5)
The amount of a penalty imposed under the regulations in respect of a failure
 
 
or contravention must not exceed—
 
 
(a)
£10,000, in the case of an individual, and
40
 
(b)
£100,000, in any other case.
 

Page 21

 
(6)
Value for money regulations may provide that where the Pensions Regulator
 
 
has, in compliance with a requirement of regulations under subsection (3) (c) (ii)
 
 
, imposed a penalty on a person the Regulator is to be authorised to withdraw
 
 
the penalty if—
 
 
(a)
the Regulator considers it appropriate to do so having regard to the
5
 
circumstances in which the contravention took place, and
 
 
(b)
any prescribed conditions are met.
 
 
(7)
Value for money regulations may provide—
 
 
(a)
that if the Regulator determines that a rating assigned by responsible
 
 
trustees or managers for the purposes of section 11 (4) (a) is not correct,
10
 
the Regulator may by a notice (a “directions notice”) substitute for
 
 
that rating the rating the Regulator considers should have been
 
 
assigned;
 
 
(b)
that, where the Pensions Regulator substitutes a rating by virtue of
 
 
paragraph (a) , that rating is to be deemed for all purposes to be the
15
 
rating assigned to the scheme under section 15 (1) .
 
 
(8)
A directions notice under subsection (7) must set out the reasons for the
 
 
Pensions Regulator’s determination.
 
 
(9)
Regulations may provide for the making of a reference to the First-tier Tribunal
 
 
or Upper Tribunal in respect of a determination of the Pensions Regulator
20
 
under subsection (7) (a) .
 
 
(10)
The Pensions Act 1995 is amended as follows.
 
 
(11)
In section 7 (appointment of trustees)—
 
 
(a)
in subsection (3), after paragraph (a) insert—
 
 
“(aa)
where subsection (3A) or (3B) applies, to secure that
25
 
the trustees as a whole have the skills and knowledge
 
 
necessary for ensuring that the scheme, or an
 
 
arrangement under it, improves its performance as
 
 
regards the provision of value for money;”
 
 
(b)
after subsection (3) insert—
30
 
“(3A)
This subsection applies where—
 
 
(a)
the trust scheme is a regulated VFM scheme (as defined
 
 
in section 11 (1) (a) ) of the Pension Schemes Act 2025),
 
 
and
 
 
(b)
the most recent rating assigned to the scheme under
35
 
section 15 (1) of that Act was an intermediate or “not
 
 
delivering” rating.
 
 
(3B)
This subsection applies where—
 
 
(a)
an arrangement under the trust scheme is a regulated
 
 
VFM arrangement, and
40

Page 22

 
(b)
the most recent rating assigned to the arrangement
 
 
under section 15 (1) of that Act was an intermediate or
 
 
“not delivering” rating.”
 
 
(c)
at the end insert—
 
 
“(7)
In this section “regulated VFM arrangement” and “regulated
5
 
VFM scheme” are to be interpreted in accordance with section
 
 
21 of the Pension Schemes Act 2025.”
 
 
(12)
In section 11 (powers to wind up schemes), in subsection (1)—
 
 
(a)
omit the “or” after paragraph (b), and
 
 
(b)
after paragraph (c) insert—
10
 
“(d)
the scheme is a regulated VFM scheme and—
 
 
(i)
the rating most recently assigned to the scheme
 
 
under section 15 (1) of the Pension Schemes Act
 
 
2025 is “not delivering”, and
 
 
(ii)
the Authority are satisfied that the scheme is
15
 
not capable of providing value for money, or
 
 
(e)
the following conditions are met in relation to a
 
 
regulated VFM arrangement (“A”) under the scheme—
 
 
(i)
that the rating most recently assigned to A under
 
 
section 15 (1) of the Pension Schemes Act 2025
20
 
is “not delivering”, and
 
 
(ii)
the Authority are satisfied that A is not capable
 
 
of providing value for money.”;
 
 
(c)
at the end insert—
 
 
“(8)
In subsection (1)—
25
 
(a)
“regulated VFM arrangement” and “regulated VFM
 
 
scheme” have the same meaning as in Chapter 2 of Part
 
 
2 of the Pension Schemes Act 2025 (see section 21 of
 
 
that Act);
 
 
(b)
the reference to the provision of value for money is to
30
 
be interpreted in accordance with that Chapter.”
 
19
Sharing of database where FCA makes corresponding rules
 
 
(1)
This section applies if the Financial Conduct Authority makes rules, in relation
 
 
to persons regulated by it, that correspond to value for money regulations.
 
 
(2)
The Secretary of State may by regulations make provision for the purpose of
35
 
enabling or facilitating the use of the database mentioned in section 12 (2) (d)
 
 
for the publication or sharing of information—
 
 
(a)
that relates to persons to whom the rules made by the Financial
 
 
Conduct Authority apply, and
 
 
(b)
that corresponds to metric data,
40
 
including provision conferring functions on a person appointed as mentioned
 
 
in section 12 (2) (d) .
 

Page 23

 
(3)
Regulations under subsection (2) are subject to the negative procedure.
 
20
Crown application
 
 
(1)
This Chapter applies to a pension scheme managed by or on behalf of the
 
 
Crown as it applies to other pension schemes.
 
 
(2)
Accordingly, references in this Chapter to a person in their capacity as a
5
 
trustee or manager of a pension scheme include the Crown, or a person acting
 
 
on behalf of the Crown, in that capacity.
 
 
(3)
This Chapter applies to persons employed by or under the Crown as it applies
 
 
to persons employed by a private person.
 
21
Interpretation of Chapter
10
 
In this Chapter—
 
 
“action plan” has the meaning given by section 15 (6) ;
 
 
“intermediate rating” means an “intermediate” VFM rating ( section
 
 
15 (1) (c) );
 
 
“fully delivering rating” means a fully delivering VFM rating (see section
15
 
15 (1) (a) );
 
 
“improvement plan” is to be interpreted in accordance with section
 
 
16 (2) (a) ;
 
 
“metric data” is to be interpreted in accordance with section 11 (2) (c) ;
 
 
“money purchase benefits” has the same meaning as in the Pension
20
 
Schemes Act 1993 (see section 181 of that Act);
 
 
“not delivering rating” means a “not delivering” VFM rating (see section
 
 
15 (1) (b) );
 
 
“occupational pension scheme” has the same meaning as in the Pension
 
 
Schemes Act 1993 (see section 1(1) of that Act);
25
 
“prescribed” means prescribed by value for money regulations;
 
 
“regulated VFM arrangement” is to be interpreted in accordance with
 
 
section 11 (1) (b) ;
 
 
“regulated VFM scheme” is to be interpreted in accordance with section
 
 
11 (1) (a) ;
30
 
“relevant pension scheme” is to be interpreted in accordance with section
 
 
11 (12) and (13) ;
 
 
“responsible trustees or managers” is to be interpreted in accordance
 
 
with section 11 (8) ;
 
 
“trustee or manager” means—
35
 
(a)
in relation to a scheme established under a trust, the trustees;
 
 
(b)
in relation to any other scheme, the managers,
 
 
(including in the words that define “responsible trustees or managers”
 
 
in section 11 (8) );
 
 
“value for money regulations” has the meaning given by section 11 (1) ;
40

Page 24

 
“VFM assessment” has the meaning given by section 11 (2) (a) ;
 
 
“VFM period” is to be interpreted in accordance with section 11 (2) (a) ;
 
 
“VFM rating” is to be interpreted in accordance with section 11 (4) (a) .
 

Chapter 2

 

Consolidation of small dormant pension pots

5

Power to make small pots regulations

 
22
Small pots regulations
 
 
(1)
The Secretary of State may make regulations (“small pots regulations”) for
 
 
the purpose of securing that small dormant pension pots held by
 
 
auto-enrolment schemes are—
10
 
(a)
held by consolidator schemes, and
 
 
(b)
in the case of consolidator schemes that have more than one
 
 
arrangement, held subject to consolidator arrangements.
 
 
(2)
A pension pot is “small” if its value, determined as at such time and in such
 
 
manner as is prescribed, is £1,000 or less (but is not nil).
15
 
(3)
A pension pot is “dormant” if—
 
 
(a)
no contributions were paid into the pension pot by, or on behalf or
 
 
in respect of, the individual for whom the pot is held during such
 
 
period of at least 12 months as is prescribed, and
 
 
(b)
the individual has, subject to any prescribed exceptions, taken no step
20
 
to confirm or alter the way in which the pension pot is invested.
 
 
(4)
The period that may be prescribed under subsection (3) (a) in relation to a
 
 
pension pot in existence at the time the regulations come into force may begin
 
 
at any time after the coming into force of this section.
 
 
(5)
Small pots regulations—
25
 
(a)
are subject to the affirmative procedure if they—
 
 
(i)
are the first such regulations,
 
 
(ii)
prescribe a person under section 23 (1) (determination of
 
 
destinations for small pots),
 
 
(iii)
include provision under section 24 (1) or 26 (1) (requirements
30
 
to send transfer notices or transfer pension pots), or
 
 
(iv)
amend or repeal provision contained in an Act;
 
 
(b)
otherwise, are subject to the negative procedure.
 

Page 25

Transfers

 
23
Determination of destinations for small pots
 
 
(1)
Small pots regulations must require a prescribed person to make, in relation
 
 
to each small dormant pension pot held by an auto-enrolment scheme—
 
 
(a)
a proposal in relation to the pot (“the default proposal”), and
5
 
(b)
one or more other proposals in relation to the pot (“the alternative
 
 
proposals”).
 
 
(2)
For the purposes of this Chapter a “proposal”, in relation to a small dormant
 
 
pension pot, means a proposal that—
 
 
(a)
the pot should be held by a specified consolidator scheme, and
10
 
(b)
if there is more than one arrangement under that scheme, the pot
 
 
should be held subject to a specified arrangement under the scheme.
 
 
In this subsection “specified” means specified in the proposal.
 
 
(3)
Subsection (1) does not apply in relation to a small dormant pension pot if—
 
 
(a)
the auto-enrolment scheme that holds the pot is itself a consolidator
15
 
scheme,
 
 
(b)
any of the sums or assets comprising the pot, or any sums or assets
 
 
from which any of the sums or assets comprising the pot derive, were
 
 
at any time comprised in a small dormant pension pot in respect of
 
 
which a transfer notice was sent under small pots regulations, and
20
 
(c)
no response to that notice was received under section 24 (3) (d) (ii) .
 
 
(4)
A person specified under subsection (1) may be a body corporate established
 
 
by or under the regulations.
 
 
(5)
Small pots regulations may, in compliance with subsection (1) —
 
 
(a)
prescribe one person to make all of the proposals required to be made
25
 
under that subsection , or
 
 
(b)
prescribe two or more persons in relation to different descriptions of
 
 
those proposals.
 
 
(6)
Small pots regulations must require a proposal made by virtue of subsection
 
 
(1) to be notified to the trustees or managers of the auto-enrolment scheme
30
 
that holds the pension pot to which the proposal relates (unless those trustees
 
 
or managers are themselves the destination proposer).
 
 
(7)
A person prescribed under subsection (1) is referred to in this Chapter as a
 
 
“destination proposer”.
 
24
Transfer notices
35
 
(1)
Small pots regulations must require the trustees or managers of an
 
 
auto-enrolment scheme to prepare a notice (“a transfer notice”) in respect of
 
 
each small dormant pension pot held by the scheme that is not exempt and
 
 
send it to the individual for whom the pot is held.
 

Page 26

 
(2)
Small pots regulations must require a transfer notice in respect of a pension
 
 
pot to comply with the following provisions of this section.
 
 
(3)
The notice must—
 
 
(a)
set out the default proposal in relation to the pot;
 
 
(b)
set out the alternative proposal or proposals in relation to the pot;
5
 
(c)
state that, if the individual does not respond to the notice, the pot
 
 
will—
 
 
(i)
if the default proposal specifies that the pot be transferred to
 
 
a consolidator scheme, be transferred to that scheme, and
 
 
(ii)
if there is more than one arrangement under the consolidator
10
 
scheme specified in the default proposal, be held subject to the
 
 
arrangement so specified;
 
 
(d)
invite the individual to consider whether they are content with the
 
 
default proposal and, if not, to respond to the notice stating either—
 
 
(i)
that they want to adopt one of the alternative proposals and
15
 
if so which, or
 
 
(ii)
that they do not want any action to be taken in relation to the
 
 
pension pot.
 
 
(4)
Where membership of a consolidator scheme or a consolidator arrangement
 
 
specified in a proposal set out in a transfer notice entails being a party to a
20
 
contract with the trustees or managers of the scheme, the notice must set out,
 
 
or otherwise communicate, the terms of such a contract.
 
 
(5)
The notice must include such details as may be prescribed relating to—
 
 
(a)
the pension pot,
 
 
(b)
the auto-enrolment scheme, and
25
 
(c)
the consolidator scheme or schemes, and any consolidator
 
 
arrangements, specified in a proposal set out in the notice.
 
25
Exempt pots
 
 
(1)
A small dormant pension pot is “exempt” if—
 
 
(a)
prescribed conditions are met in relation to the pot, and
30
 
(b)
the trustees or managers of the scheme that holds it determine that it
 
 
is in the best interests of the individual for whom the pot is held that
 
 
it should not be transferred in accordance with small pots regulations.
 
 
(2)
A determination in relation to an individual under subsection (1) (b) may be
 
 
made by reference to a class of individuals of which the individual in question
35
 
is a member.
 
 
(3)
Small pots regulations may include further provision about how
 
 
determinations under subsection (1) (b) are to be made.
 

Page 27

26
Transfer etc of small dormant pension pots
 
 
(1)
Small pots regulations must require the trustees or managers of an
 
 
auto-enrolment scheme, in relation to each small dormant pot held by the
 
 
scheme in respect of which they have sent a transfer notice, to implement the
 
 
proposals set out in the notice in accordance with this section.
5
 
(2)
Subsection (1) does not apply to a pension pot if the trustees or managers
 
 
have received a response under section 24 (3) (d) (ii) in relation to it.
 
 
(3)
Small pots regulations must secure that if—
 
 
(a)
the trustees or managers do not receive a response to the notice, and
 
 
(b)
the default proposal involves the transfer of the pot to a consolidator
10
 
scheme,
 
 
the trustees or managers are required to transfer the pot to that scheme.
 
 
(4)
Small pots regulations must secure that if—
 
 
(a)
the trustees or managers receive a response to the notice, and
 
 
(b)
the alternative option identified by the individual under section
15
 
24 (3) (d) (i) involves the transfer of the pot to a consolidator scheme,
 
 
the trustees or managers are required to transfer the pot to that scheme.
 
 
(5)
Small pots regulations must secure that if—
 
 
(a)
the trustees or managers do not receive a response to the notice, and
 
 
(b)
the default proposal involves the pot being held by a consolidator
20
 
scheme subject to an arrangement specified in the proposal,
 
 
the pot is required to be held subject to that arrangement.
 
 
(6)
Small pots regulations must secure that if—
 
 
(a)
the trustees or managers receive a response to the notice, and
 
 
(b)
the alternative proposal identified by the individual under section
25
 
24 (3) (d) (i) involves the pot being held by an arrangement specified in
 
 
the proposal,
 
 
the pot is required to be held subject to that arrangement.
 
 
(7)
The trustees or managers may transfer a pension pot by virtue of subsection
 
 
(3) or (4) , or change the arrangement subject to which a pension pot is held
30
 
by virtue of subsection (5) or (6) , notwithstanding that it breaches a term of
 
 
the scheme (such as a requirement for consent); and any such breach is to be
 
 
disregarded for all purposes.
 
27
Effect of transfer on membership of scheme etc
 
 
(1)
Subsections (2) and (3) apply where a pension pot held for an individual is
35
 
transferred by virtue of section 26 (3) or (4) to a different pension scheme (“the
 
 
receiving scheme”).
 
 
(2)
The individual becomes a member of the receiving scheme in relation to the
 
 
pot, and acquires the rights, and becomes subject to the obligations, of
 
 
membership.
40

Page 28

 
(3)
Where membership of the receiving scheme in relation to the pot entails being
 
 
a party to a contract with its trustees or managers, a contract is treated as
 
 
entered into between the individual and the trustees or managers—
 
 
(a)
at the time at which the pension pot is transferred to the receiving
 
 
scheme, and
5
 
(b)
on the terms communicated to the individual by virtue of section 24 (4) .
 
 
(4)
Subsections (5) and (6) apply where a pension pot is by virtue of section 26 (5)
 
 
or (6) held subject to a different arrangement under the same pension scheme,
 
 
or an arrangement under a different pension scheme.
 
 
(5)
The individual becomes a member of the arrangement in relation to the pot,
10
 
and acquires the rights, and becomes subject to the obligations, of membership.
 
 
(6)
Where membership of the arrangement in relation to the pot entails being a
 
 
party to a contract with its trustees or managers of the pension scheme in
 
 
question, a contract is treated as entered into between the individual and the
 
 
trustees or managers—
15
 
(a)
at the time at which the pension pot is first held subject to the
 
 
arrangement, and
 
 
(b)
on the terms communicated to the individual by virtue of section 24 (4) .
 
28
Timing of transfers
 
 
(1)
Small pots regulations must prohibit the trustees or managers of an
20
 
auto-enrolment scheme from transferring a pension pot by virtue of section
 
 
26 (3) or (4) , or changing the arrangement subject to which it is held by virtue
 
 
of section 26 (5) or (6) , before the end of the required notice period.
 
 
(2)
In subsection (1) “the required notice period”, in relation to a pension pot,
 
 
means the period of 30 days, or such longer period as may be prescribed,
25
 
beginning with the day on which the transfer notice in respect of the pot is
 
 
sent.
 
 
(3)
Small pots regulations must (subject to subsection (5) ) require the trustees or
 
 
managers of an auto-enrolment scheme to effect any transfer of a pension pot
 
 
by virtue of section 26 (3) or (4) , and any change in the arrangement subject
30
 
to which it is held by virtue of section 26 (5) or (6) , before the end of the
 
 
required transfer period.
 
 
(4)
In subsection (3) “the required transfer period”, in relation to a pension pot,
 
 
means the period of one year beginning with—
 
 
(a)
the date on which the provision of the regulations under which the
35
 
requirement is imposed comes into force, or
 
 
(b)
if later, the date on which the pension pot first becomes small and
 
 
dormant.
 
 
(5)
Small pots regulations may include provision extending the required transfer
 
 
period until the end of a prescribed period beginning with the date on which
40

Page 29

 
the trustees or managers are notified of the proposals made by virtue of
 
 
section 23 (1) in respect of the pot.
 

Authorisation

 
29
Authorisation of consolidator schemes etc by the Pensions Regulator
 
 
(1)
Small pots regulations must permit the trustees or managers of an eligible
5
 
Master Trust scheme to apply to the Pensions Regulator for authorisation
 
 
of—
 
 
(a)
the scheme, or
 
 
(b)
such arrangements under the scheme as are specified in the application.
 
 
(2)
Small pots regulations must require the Pensions Regulator to grant an
10
 
application for authorisation where—
 
 
(a)
the application is made in accordance with regulations made by virtue
 
 
of subsection (1) , and
 
 
(b)
prescribed conditions are met.
 
 
(3)
Small pots regulations may permit or require the Pensions Regulator, where
15
 
prescribed conditions are, or cease to be, met in relation to a consolidator
 
 
scheme or arrangement—
 
 
(a)
to require the trustees or managers to take prescribed steps;
 
 
(b)
to prohibit a destination proposer, in prescribed cases or in all cases,
 
 
from specifying the scheme or arrangement in proposals under section
20
 
23 (1) ;
 
 
(c)
to withdraw authorisation.
 
 
(4)
The conditions that may be prescribed under subsection (2) (b) or (3) include
 
 
conditions relating to—
 
 
(a)
the terms of the scheme,
25
 
(b)
the value of sums and assets held by the scheme for the purpose of
 
 
providing money purchase benefits,
 
 
(c)
the fees charged by the scheme, or
 
 
(d)
a VFM rating assigned to the scheme or any arrangement under the
 
 
scheme;
30
 
and include conditions that involve the exercise of a discretion by the Pensions
 
 
Regulator.
 
 
(5)
Small pots regulations may permit or require the Pensions Regulator, where
 
 
it withdraws authorisation, to require the trustees or managers of the scheme
 
 
in question to take prescribed steps in relation to relevant pension pots.
35
 
(6)
The steps that may be required to be taken by virtue of subsection (5) include
 
 
steps to limit the fees that may be charged.
 
 
(7)
For the purposes of subsection (5) a pension pot is “relevant” if—
 
 
(a)
any of the sums or assets comprising the pot, or any sums or assets
 
 
from which any of the sums or assets comprising the pot derive, were
40

Page 30

 
at any time comprised in a small dormant pension pot in respect of
 
 
which a transfer notice was sent under small pots regulations, and
 
 
(b)
no response to that notice was received under section 24 (3) (d) (ii) .
 
 
(8)
For the purposes of this Chapter a Master Trust scheme is “eligible” if it is
 
 
authorised under section 5 of the Pension Schemes Act 2017 (authorisation
5
 
of Master Trust schemes).
 
30
Consolidator schemes and consolidator arrangements
 
 
(1)
In this Chapter “consolidator scheme” means—
 
 
(a)
an eligible Master Trust scheme—
 
 
(i)
that is for the time being authorised by virtue of section
10
 
29 (1) (a) , or
 
 
(ii)
any arrangement under which is for the time being authorised
 
 
by virtue of section 29 (1) (b) , or
 
 
(b)
an FCA-regulated pension scheme that is for the time being included
 
 
on a list published by the FCA under section 137FBC (2) (b) of the
15
 
Financial Services and Markets Act 2000.
 
 
(2)
In this Chapter “consolidator arrangement” means—
 
 
(a)
an arrangement under an eligible Master Trust scheme where—
 
 
(i)
the scheme is for the time being authorised by virtue of section
 
 
29 (1) (a) , or
20
 
(ii)
the arrangement is for the time being authorised by virtue of
 
 
section 29 (1) (b) , or
 
 
(b)
an arrangement under an FCA-regulated pension scheme that is for
 
 
the time being included on a list published by the FCA under section
 
 
137FBC (2) (b) of the Financial Services and Markets Act 2000.
25

Supplementary

 
31
Further provision about contents of small pots regulations
 
 
(1)
Small pots regulations may, in particular—
 
 
(a)
authorise the Pensions Regulator to charge a prescribed fee in respect
 
 
of an application for authorisation under the regulations;
30
 
(b)
confer a right of appeal to the First-tier Tribunal or the Upper Tribunal;
 
 
(c)
require the trustees or managers of a relevant pension scheme to take
 
 
prescribed steps to improve the accuracy and completeness of
 
 
information held by them;
 
 
(d)
require a relevant person, other than the FCA, to provide prescribed
35
 
information, in such form and at such time as may be prescribed, to—
 
 
(i)
a relevant person, or
 
 
(ii)
an individual for whom a relevant pension scheme holds a
 
 
pension pot;
 

Page 31

 
(e)
require the trustees or managers of a relevant pension scheme to keep,
 
 
and retain for a prescribed period, prescribed records;
 
 
(f)
provide (otherwise than under paragraphs (c) to (e) ) for the processing
 
 
of information;
 
 
(g)
limit the fees that may be charged by a relevant pension scheme in
5
 
connection with the transfer of a pension pot under the regulations;
 
 
(h)
require a destination proposer, the trustees or managers of a relevant
 
 
pension scheme, or the Secretary of State, to pay compensation to an
 
 
individual who has suffered a loss as a result of a breach of the
 
 
regulations;
10
 
(i)
confer (otherwise than under any of paragraphs (a) to (h) ) a function
 
 
on a relevant person, including a function involving the exercise of a
 
 
discretion;
 
 
(j)
provide for the delegation of a function conferred by the regulations.
 
 
(2)
In subsection (1) (c) to (f) , a reference to information includes personal data,
15
 
and a reference to records includes records of personal data.
 
 
(3)
The processing of personal data in accordance with the regulations does not
 
 
breach—
 
 
(a)
any obligation of confidence owed by the person processing the
 
 
personal data, or
20
 
(b)
any other restriction on the processing of personal data (however
 
 
imposed).
 
 
(4)
In this section—
 
 
“personal data” has the same meaning as in the Data Protection Act 2018
 
 
(see section 3 of that Act);
25
 
“processing” has the same meaning as in the Data Protection Act 2018
 
 
(see section 3 of that Act);
 
 
“relevant pension scheme” means—
 
 
(a)
an auto-enrolment scheme, or
 
 
(b)
a consolidator scheme;
30
 
“relevant person” means—
 
 
(a)
the Pensions Regulator,
 
 
(b)
the FCA,
 
 
(c)
a destination proposer, or
 
 
(d)
the trustees or managers of a relevant pension scheme.
35
 
(5)
The power to make small pots regulations is capable of being exercised so
 
 
as to amend or repeal provision contained in an Act.
 
 
(6)
In particular, small pots regulations may—
 
 
(a)
amend section 146 of the Pension Schemes Act 1993 (functions of the
 
 
Pensions Ombudsman) so as to confer on the Pensions Ombudsman
40
 
the function of investigating and determining complaints or disputes
 
 
relating to a destination proposer;
 

Page 32

 
(b)
amend section 175 of that Act (levies towards certain expenditure) so
 
 
as to include expenditure of—
 
 
(i)
a destination proposer, or
 
 
(ii)
the Secretary of State by virtue of section 31(1)(h)
 
 
(compensation).
5
32
Enforcement by the Pensions Regulator
 
 
(1)
Small pots regulations may make provision with a view to ensuring the
 
 
compliance of any person who is not FCA-regulated with any provision of
 
 
the regulations.
 
 
(2)
The regulations may in particular—
10
 
(a)
provide for the Pensions Regulator to issue a notice (a “compliance
 
 
notice”) to a person with a view to ensuring the person's compliance
 
 
with a provision of the regulations;
 
 
(b)
provide for the Pensions Regulator to issue a notice (a “third party
 
 
compliance notice”) to a person with a view to ensuring another
15
 
person's compliance with a provision of the regulations;
 
 
(c)
provide for the Pensions Regulator to issue a notice (a “penalty notice”)
 
 
imposing a penalty on a person where the person—
 
 
(i)
has failed to comply with a compliance notice or third party
 
 
compliance notice, or
20
 
(ii)
has contravened a provision of the regulations;
 
 
(d)
provide for the making of a reference to the First-tier Tribunal or
 
 
Upper Tribunal in respect of the issue of a penalty notice or the amount
 
 
of a penalty.
 
 
(3)
The regulations may make provision for determining the amount, or the
25
 
maximum amount, of a penalty in respect of a failure or contravention.
 
 
(4)
But the amount of a penalty imposed under the regulations in respect of a
 
 
failure or contravention must not exceed—
 
 
(a)
£10,000, in the case of an individual, and
 
 
(b)
£100,000, in any other case.
30
 
(5)
Any penalty payable under the regulations is recoverable by the Regulator.
 
 
(6)
In England and Wales, any such penalty is, if the county court so orders,
 
 
recoverable under section 85 of the County Courts Act 1984 or otherwise as
 
 
if it were payable under an order of that court.
 
 
(7)
In Scotland, a penalty notice is enforceable as if it were an extract registered
35
 
decree arbitral bearing a warrant for execution issued by the sheriff court of
 
 
any sheriffdom.
 
 
(8)
The Regulator must pay into the Consolidated Fund any penalty recovered
 
 
under this section.
 

Page 33

 
(9)
A reference in this section to a provision of small pots regulations includes
 
 
a reference to a requirement or restriction imposed by the Pensions Regulator
 
 
under the regulations.
 
33
Enforcement by the FCA
 
 
(1)
The Treasury may make regulations to enable the FCA to take action (in
5
 
addition to any action it may otherwise take under the Financial Services and
 
 
Markets Act 2000) for monitoring and enforcing compliance of an
 
 
FCA-regulated person with any provision of small pots regulations.
 
 
(2)
The regulations may apply, or make provision corresponding to—
 
 
(a)
provision contained in small pots regulations by virtue of section 32
10
 
, or
 
 
(b)
any provision of the Financial Services and Markets Act 2000,
 
 
with or without modification.
 
 
(3)
Regulations under this section are subject to the affirmative procedure.
 
 
(4)
For the purposes of this Chapter a person is “FCA-regulated” if they are an
15
 
authorised person (within the meaning of the Financial Services and Markets
 
 
Act 2000) in relation to the operation of a pension scheme.
 

Interpretation etc

 
34
Power to alter definition of “small”
 
 
(1)
The Secretary of State may by regulations amend section 22 (2) (definition of
20
 
“small” in relation to a pension pot) so as to substitute a larger or smaller
 
 
amount for the amount for the time being specified there.
 
 
(2)
Before making regulations under this section the Secretary of State must—
 
 
(a)
consult such persons as the Secretary of State considers appropriate,
 
 
and
25
 
(b)
publish details of the proposed amendment, and the Secretary of
 
 
State’s reasons for making the proposal, and consider any
 
 
representations made.
 
 
(3)
Regulations under this section are subject to the affirmative procedure.
 
35
Crown application
30
 
(1)
This Chapter applies to a pension scheme managed by or on behalf of the
 
 
Crown as it applies to other pension schemes.
 
 
(2)
Accordingly, references in this Chapter to a person in their capacity as a
 
 
trustee or manager of a pension scheme include the Crown, or a person acting
 
 
on behalf of the Crown, in that capacity.
35

Page 34

 
(3)
This Chapter applies to persons employed by or under the Crown as it applies
 
 
to persons employed by a private person.
 
36
Interpretation of Chapter
 
 
(1)
In this Chapter—
 
 
“the alternative proposals” , in relation to a small dormant pension pot,
5
 
has the meaning given by section 23 (1) ;
 
 
“auto-enrolment scheme” has the meaning given by subsection (5) ;
 
 
“consolidator arrangement” has the meaning given by section 30 (2) ;
 
 
“consolidator scheme” has the meaning given by section 30 (1) ;
 
 
“the default proposal” , in relation to a small dormant pension pot, has
10
 
the meaning given by section 23 (1) ;
 
 
“destination proposer” has the meaning given by section 23 (7) ;
 
 
“dormant” , in relation to a pension pot, has the meaning given by section
 
 
22 (3) ;
 
 
“eligible” , in relation to a Master Trust scheme, has the meaning given
15
 
by section 29 (8) ;
 
 
“exempt” , in relation to a pension pot, has the meaning given by section
 
 
25 ;
 
 
“the FCA” means the Financial Conduct Authority;
 
 
“FCA-regulated” , in relation to a pension scheme, has the meaning given
20
 
by subsection (2) ;
 
 
“FCA-regulated” , in relation to a person, has the meaning given by
 
 
section 33 (4) ;
 
 
“functions” includes powers and duties;
 
 
“Master Trust scheme” has the same meaning as in the Pension Schemes
25
 
Act 2017 (see section 1(1) of that Act);
 
 
“money purchase benefits” has the same meaning as in the Pension
 
 
Schemes Act 1993 (see section 181(1) of that Act);
 
 
“pension pot” has the meaning given by section 37 ;
 
 
“pension scheme” has the meaning given by section 1(5) of the Pension
30
 
Schemes Act 1993 ;
 
 
“prescribed” means specified in, or determined in accordance with, small
 
 
pots regulations;
 
 
“proposal” , in relation to a small dormant pension pot, has the meaning
 
 
given by section 23 (2) ;
35
 
“provider” , in relation to an FCA-regulated pension scheme, means the
 
 
person mentioned in subsection (2) (b) ;
 
 
“small” , in relation to a pension pot, has the meaning given by section
 
 
22 (2) ;
 
 
“small pots regulations” has the meaning given by section 22 (1) ;
40
 
“terms” , in relation to a pension scheme, has the meaning given by
 
 
subsection (3) ;
 

Page 35

 
“transfer” , in relation to a pension pot, includes a transfer of an amount
 
 
representing its value;
 
 
“transfer notice” has the meaning given by section 24 (1) ;
 
 
“trustees or managers” , in relation to a pension scheme, means (subject
 
 
to subsection (4) )—
5
 
(a)
in the case of a scheme established under a trust, the trustees
 
 
of the scheme, and
 
 
(b)
in any other case, the persons responsible for the management
 
 
of the scheme;
 
 
“VFM rating” has the same meaning as in Chapter 1 .
10
 
(2)
A pension scheme is “FCA-regulated” if the operation of the scheme—
 
 
(a)
is carried on in such a way as to be a regulated activity for the
 
 
purposes of the Financial Services and Markets Act 2000, and
 
 
(b)
is carried on in the United Kingdom by a person who is in relation
 
 
to that activity an authorised person under section 19 of that Act.
15
 
(3)
A reference in this Part to the terms of a pension scheme is to the terms of
 
 
any instrument or agreement—
 
 
(a)
in which the scheme is comprised, or
 
 
(b)
to which the provider of the scheme and any member are parties in
 
 
connection with the scheme.
20
 
(4)
A reference in this Chapter to the trustees or managers of a pension scheme
 
 
is, where the scheme is FCA-regulated, a reference to the provider of the
 
 
scheme.
 
 
(5)
A pension scheme is an “auto-enrolment scheme” if any individual is or at
 
 
any time was an active member of the scheme in consequence of arrangements
25
 
under section 3 (2) , 5 (2) or 7 (3) of the Pensions Act 2008 (arrangements for
 
 
jobholder to become active member of automatic enrolment scheme).
 
 
(6)
In subsection (5) “active member” has the same meaning as in Part 1 of the
 
 
Pensions Act 2008 (see section 99 of that Act).
 
37
Meaning of “pension pot”
30
 
(1)
In this Chapter, “pension pot” means sums or assets held for the purpose of
 
 
providing money purchase benefits to or in respect of a member of a pension
 
 
scheme; and—
 
 
(a)
a reference to the pension scheme that holds a pension pot is to that
 
 
pension scheme;
35
 
(b)
a reference to the individual for whom a pension pot is held is to that
 
 
member.
 
 
(2)
Where—
 
 
(a)
an individual is a member of an auto-enrolment scheme in relation to
 
 
more than one employment, and
40

Page 36

 
(b)
the sums or assets held by the scheme for the purpose of providing
 
 
money purchase benefits to or in respect of the member in relation to
 
 
those employments are accounted for separately by the scheme,
 
 
the sums or assets held in relation to each employment are regarded for the
 
 
purposes of this Chapter as separate pension pots.
5
 
(3)
In subsection (2) “employment” has the same meaning as in Part 1 of the
 
 
Pensions Act 2008 (see section 99 of that Act).
 

Amendments of other Acts

 
38
Amendments of the Financial Services and Markets Act 2000
 
 
(1)
The Financial Services and Markets Act 2000 is amended as follows.
10
 
(2)
In section 1A (the Financial Conduct Authority), in subsection (6), after
 
 
paragraph (czc) insert—
 
 
“(czd)
Chapter 2 of Part 2 of the Pension Schemes Act 2025
 
 
(consolidation of small dormant pension pots);”.
 
 
(3)
After section 137FBB insert—
15
“137FBC
FCA general rules: regulation of consolidator pension schemes
 
 
(1)
The FCA may make general rules under which the provider of an
 
 
FCA-regulated pension scheme is required to notify the FCA where
 
 
it intends that the scheme should be a consolidator scheme, or an
 
 
arrangement under the scheme should be a consolidator arrangement,
20
 
for the purposes of Chapter 2 of Part 2 of the Pension Schemes Act
 
 
2025.
 
 
(2)
If the FCA makes rules under subsection (1) it must—
 
 
(a)
make general rules regulating pension schemes that have given
 
 
(and not withdrawn) a notice of the kind mentioned in
25
 
subsection (1) , and
 
 
(b)
publish and maintain a list of FCA-regulated pension schemes,
 
 
and arrangements under such schemes, in accordance with
 
 
subsections (3) and (4).
 
 
(3)
The list must, subject to subsection (4), include each FCA-regulated
30
 
pension scheme, and each arrangement under an FCA-regulated
 
 
scheme, in relation to which the FCA has received a notice by virtue
 
 
of subsection (1) .
 
 
(4)
The list must not include a scheme or arrangement if—
 
 
(a)
the notice in relation to it has been withdrawn by the provider
35
 
of the scheme, or
 
 
(b)
the FCA has determined that it is unlikely that rules made
 
 
under subsection (1) or (2) (a) will be complied with in relation
 

Page 37

 
to the scheme or arrangement within such period as the FCA
 
 
considers reasonable.
 
 
(5)
In determining what provision to include in rules under subsection
 
 
(2) (a) , the FCA must have regard to any provision contained in small
 
 
pots regulations by virtue of section 29 of the Pension Schemes Act
5
 
2025 (authorisation of consolidator schemes etc by the Pensions
 
 
Regulator).
 
 
(6)
In this section—
 
 
“FCA-regulated” , in relation to a pension scheme, has the meaning
 
 
given by subsection (7) ;
10
 
“pension scheme” has the meaning given by section 1(5) of the
 
 
Pension Schemes Act 1993 ;
 
 
“provider” , in relation to an FCA-regulated pension scheme,
 
 
means the person referred to in subsection (7) (b) .
 
 
(7)
A pension scheme is “FCA-regulated” if the operation of the scheme—
15
 
(a)
is a regulated activity, and
 
 
(b)
is carried on in the United Kingdom by an authorised person.”
 
 
(4)
In section 204A (meaning of “relevant requirement” and “appropriate
 
 
regulator”)—
 
 
(a)
in subsection (2), after paragraph (ab) insert—
20
 
“(ac)
by small pots regulations within the meaning of Chapter
 
 
2 of Part 2 of the Pension Schemes Act 2025,”
 
 
(b)
in subsection (6), after paragraph (ab) insert—
 
 
“(ac)
by small pots regulations within the meaning of Chapter
 
 
2 of Part 2 of the Pension Schemes Act 2025;”.
25
39
Repeal of existing powers
 
 
(1)
In the Pensions Act 2014, omit the following provisions (which contain powers
 
 
that have not been brought into force to make provision for the automatic
 
 
transfer of pension benefits etc)—
 
 
(a)
section 33;
30
 
(b)
Schedule 17, except paragraph 15(1) (which contains interpretative
 
 
provisions that apply for the purposes of Schedule 18 to that Act).
 
 
(2)
In Schedule 18 to that Act (power to restrict charges or impose requirements
 
 
in relation to schemes), in paragraph 4 (interpretation), for sub-paragraph (1)
 
 
substitute—
35
 
“(1)
The definitions in paragraph 15(1) of Schedule 17 apply for the
 
 
purposes of this Schedule.”
 
 
(3)
In consequence of subsection (1) (b) , in section 256 of the Pensions Act 2004
 
 
(no indemnification for fines or civil penalties), in subsection (1)(b), for “that
 
 
Act” substitute “the Pensions Act 2014”.
40

Page 38

Chapter 3

 

Scale and asset allocation

 
40
Certain schemes providing money purchase benefits: scale and asset allocation
 
 
(1)
The Pensions Act 2008 is amended as follows.
 
 
(2)
Section 20 (quality requirement: UK money purchase schemes) is amended
5
 
as follows.
 
 
(3)
In subsection (1) , after “purchase scheme” insert “that is not a relevant Master
 
 
Trust and”.
 
 
(4)
After subsection (1) insert—
 
 
“(1A)
A money purchase scheme that is a relevant Master Trust satisfies the
10
 
quality requirement in relation to a jobholder if the conditions in
 
 
subsection (1)(a) to (c) and Condition 1 and Condition 2 of this
 
 
subsection are met.
 
 
This Condition is that the relevant Master Trust—
15
 
(a)
is approved under section 28A in respect of a main scale default
 
 
arrangement,
 
 
(b)
is exempted by regulations from the requirement for approval,
 
 
(c)
has previously been approved under section 28E (transition
 
 
pathway relief) and is to be treated in accordance with
20
 
regulations as if it had approval under section 28A ,
 
 
(d)
qualifies under section 28E for transition pathway relief, or
 
 
(e)
qualifies under section 28F for new entrant pathway relief.
 
 
This Condition is that the relevant Master Trust—
25
 
(a)
is approved under section 28C in respect of the asset allocation
 
 
requirement, or
 
 
(b)
is exempted by regulations from the requirement for approval.
 
 
(1B)
Regulations under Condition 1(b) or 2(b) of subsection (1A) may
 
 
exempt any description of relevant Master Trust, for example those
30
 
that are—
 
 
(a)
designed to meet the needs of persons with a protected
 
 
characteristic within the meaning of the Equality Act 2010, or
 
 
(b)
hybrid schemes.
 
 
(1C)
Regulations may—
35
 
(a)
permit the Regulatory Authority to determine that a relevant
 
 
Master Trust is to be treated for a period (“the protected
 
 
period”) as meeting Condition 1 or Condition 2 of subsection
 
 
(1A) for a period specified by the Regulatory Authority;
 

Page 39

 
(b)
specify circumstances in which a relevant Master Trust, which
 
 
is treated as mentioned in paragraph (a) and meets prescribed
 
 
conditions, is to be subject during a prescribed period (ending
 
 
with the end of the protected period) to any requirements
 
 
specified in the regulations; and provision under this paragraph
5
 
may include provision corresponding to any provision that
 
 
may be made under section 28A (10) ;
 
 
(c)
make provision about the Regulatory Authority requiring the
 
 
trustees or managers of a relevant Master Trust to give the
 
 
Regulatory Authority a plan showing how they propose to
10
 
meet or continue to meet the scale requirement under section
 
 
28A or the conditions for approval under section 28C .”
 
 
(5)
After subsection (3) insert—
 
 
“(4)
In this section—
 
 
“main scale default arrangement” is to be interpreted in
15
 
accordance with section 28A (12) ;
 
 
“Master Trust scheme” has the same meaning as in the Pension
 
 
Schemes Act 2017 (see section 1(1) of that Act);
 
 
“relevant Master Trust” means a money purchase scheme that
 
 
has its main administration in the United Kingdom and is an
20
 
authorised Master Trust scheme.”
 
 
(6)
In section 25 (quality requirement: non-UK occupational pension schemes)
 
 
for “18(b) or (c)” substitute “18(c)”.
 
 
(7)
Section 26 (quality requirement: UK personal pension schemes) is amended
 
 
as follows.
25
 
(8)
After subsection (7) insert—
 
 
“(7A)
The fifth condition is that if the scheme is a group personal pension
 
 
scheme of a prescribed description it must, unless subsection (7C)
 
 
applies, hold an approval under section 28B in respect of a main scale
 
 
default arrangement.
30
 
(7B)
The sixth condition is that if the scheme is a group personal pension
 
 
scheme of a prescribed description it must hold an approval under
 
 
section 28C in respect of the asset allocation requirement.
 
 
(7C)
This subsection applies if the group personal pension scheme—
 
 
(a)
has previously been approved under section 28E (transition
35
 
pathway relief) and is to be treated in accordance with
 
 
regulations as if it had approval under section 28B ,
 
 
(b)
qualifies under section 28E for transition pathway relief, or
 
 
(c)
qualifies under section 28F for new entrant pathway relief.
 
 
(7D)
Regulations under subsection (7A) or (7B) may exempt any description
40
 
of group personal pension schemes, for example those that are
 

Page 40

 
designed to meet the needs of persons with a protected characteristic
 
 
within the meaning of the Equality Act 2010.
 
 
(7E)
Regulations may—
 
 
(a)
permit the Regulatory Authority to determine that a group
 
 
personal pension scheme is to be treated as meeting the fifth
5
 
or sixth condition for a period (the “protected period”) specified
 
 
by the Regulatory Authority;
 
 
(b)
specify circumstances in which a group personal pension
 
 
scheme which is treated as mentioned in paragraph (a) and
 
 
meets prescribed conditions is to be subject during a prescribed
10
 
period (which ends with the end of the protected period) to
 
 
any requirements specified in the regulations; and provision
 
 
under this paragraph may include provision corresponding to
 
 
any provision that may be made under section 28A (10) ;
 
 
(c)
make provision about the Regulatory Authority requiring the
15
 
provider of a group personal pension scheme to give the
 
 
Regulatory Authority a plan showing how they propose to
 
 
meet or continue to meet the scale requirement under section
 
 
28B or the conditions for approval under section 28C .”
 
 
(9)
After subsection (9) insert—
20
 
“(10)
In this section “main scale default arrangement” is to be interpreted
 
 
in accordance with section 28B (12) .”
 
 
(10)
In section 28 (certification that quality requirement or alternative requirement
 
 
is satisfied) in subsection (3A) omit paragraphs (a) and (c).
 
 
(11)
In section 28 (certification that quality requirement or alternative requirement
25
 
is satisfied) in subsection (4) (definition of “relevant quality requirement”)—
 
 
(a)
in paragraph (a), at the end insert “, except so far as that quality
 
 
requirement relates to Condition 1 or 2 in subsection (1A) ”;
 
 
(b)
in paragraph (b), at the end insert “, except so far as that quality
 
 
requirement relates to the fifth and sixth conditions”;
30
 
(c)
in paragraph (c), at the end insert “, except so far as those requirements
 
 
relate to Condition 1 or 2 in section 20 (1A) ”.
 
 
(12)
After section 28 insert—
 
“28A
MSDA approval: relevant Master Trusts
 
 
(1)
For the purposes of Condition 1 of section 20 (1A) , the Regulatory
35
 
Authority (“the Authority”) may approve a relevant Master Trust (“the
 
 
RMT”) in respect of a main scale default arrangement if the Authority
 
 
determines that—
 
 
(a)
the RMT meets the scale requirement by reference to the main
 
 
scale default arrangement, and
40
 
(b)
any other prescribed conditions are met.
 

Page 41

 
(2)
The RMT meets the scale requirement by reference to a main scale
 
 
default arrangement if the sum of the values mentioned in paragraphs
 
 
(a) to (c) of subsection (4) is equal to or greater than the minimum
 
 
amount.
 
 
(3)
In this section “the minimum amount” means £25 billion.
5
 
(4)
Subject to subsection (7) , those values are—
 
 
(a)
the total value of assets of the RMT which—
 
 
(i)
represent accrued rights of members of that scheme,
 
 
(ii)
are held subject to the main scale default arrangement,
 
 
and
10
 
(iii)
are managed under a common investment strategy;
 
 
(b)
if one or more relevant Master Trusts are connected with the
 
 
RMT, the total value of assets of those schemes that—
 
 
(i)
represent accrued rights of members of those schemes,
 
 
(ii)
are held subject to the main scale default arrangement,
15
 
and
 
 
(iii)
are managed under the investment strategy mentioned
 
 
in paragraph (a) (iii) ;
 
 
(c)
if one or more group personal pension schemes are connected
 
 
with the RMT, the total value of assets of those schemes that—
20
 
(i)
represent accrued rights of members of those schemes,
 
 
(ii)
are held subject to the main scale default arrangement,
 
 
and
 
 
(iii)
are managed under the investment strategy mentioned
 
 
in paragraph (a) (iii) .
25
 
(5)
A reference in subsection (4) to a relevant Master Trust or a group
 
 
personal pension scheme being “connected” with the RMT is to a
 
 
relevant Master Trust or a group personal pension scheme having a
 
 
prescribed connection with the RMT.
 
 
(6)
Regulations under subsection (5) may, for example, provide—
30
 
(a)
that a relevant Master Trust is connected with the RMT only
 
 
if it has the same scheme funder or scheme strategist as the
 
 
RMT, or
 
 
(b)
that a group personal pension scheme is connected with the
 
 
RMT only if its provider is also the scheme funder or scheme
35
 
strategist of the RMT.
 
 
(7)
Regulations may make provision about amounts that are to be excluded
 
 
or adjusted in calculating the total value under subsection (4) (a) or
 
 
(c) .
 
 
(8)
Regulations may make provision about—
40
 
(a)
how the satisfaction of criteria relevant to the meeting of the
 
 
scale requirement is to be evidenced;
 

Page 42

 
(b)
what it means for assets of a pension scheme to be managed
 
 
under a “common investment strategy” (including in particular
 
 
provision defining that expression by reference to whether or
 
 
how far the assets relating to each member of the scheme are
 
 
allocated in the same proportion to the same investments).
5
 
(9)
Regulations may make provision about how the value of assets is to
 
 
be determined for the purposes of subsections (2) and (4) .
 
 
(10)
Regulations may make provision—
 
 
(a)
as to a time limit within which the Authority must decide an
 
 
application for approval;
10
 
(b)
as to procedures in connection with approvals or where an
 
 
approval has been given;
 
 
(c)
about the withdrawal of approvals including conditions for,
 
 
and procedures in connection with, withdrawals;
 
 
(d)
for the Authority’s decision on the application, or on a decision
15
 
to withdraw approval, to be referred to the Upper Tribunal;
 
 
(e)
for the Authority to maintain and publish a list of relevant
 
 
Master Trusts that are approved under this section.
 
 
(11)
Regulations under subsection (10) (c) may in particular make
 
 
provision—
20
 
(a)
about steps, including communications with a relevant Master
 
 
Trust, that the Authority must take before deciding to withdraw
 
 
an approval;
 
 
(b)
setting a minimum period that must elapse between a
 
 
notification that approval is to be withdrawn and the
25
 
withdrawal of the approval;
 
 
(c)
where the Authority has given notice to the trustees or
 
 
managers of a relevant Master Trust that the approval (under
 
 
this section) of that scheme is likely to be withdrawn and any
 
 
other prescribed conditions are met, requiring the trustees or
30
 
managers to—
 
 
(i)
act in relation to the scheme as if its approval has been
 
 
withdrawn, and
 
 
(ii)
take steps for ensuring that persons (such as employers)
 
 
who may be affected in the event of the relevant Master
35
 
Trust’s losing that approval are promptly informed if
 
 
such a loss should occur;
 
 
(d)
permitting the Authority to impose, on a person who fails to
 
 
comply with a requirement under paragraph (c), a penalty
 
 
determined in accordance with the regulations that does not
40
 
exceed £100,000;
 
 
(e)
providing for the making of a reference to the First-tier Tribunal
 
 
or Upper Tribunal in respect of the issue of a penalty notice
 
 
or the amount of a penalty.
 

Page 43

 
(12)
Before making regulations under this section the Secretary of State
 
 
must consult such persons as the Secretary of State considers
 
 
appropriate.
 
 
(13)
In this section “main scale default arrangement” means an
 
 
arrangement—
5
 
(a)
that is used for the purposes of one or more pension schemes,
 
 
and
 
 
(b)
subject to which assets of any one of those schemes must under
 
 
the rules of the scheme be held, or may under those rules be
 
 
held, if the member of the scheme to whom the assets relate
10
 
does not make a choice as to the arrangement subject to which
 
 
the assets are to be held.
 
28B
MSDA approval: group personal pension scheme
 
 
(1)
The Regulatory Authority (“the Authority”) may, for the purposes of
 
 
the Condition in section 26 (7A) , approve a group personal pension
15
 
scheme (“the GPP”) in respect of a main scale default arrangement if
 
 
the Authority determines that—
 
 
(a)
the GPP meets the scale requirement by reference to the main
 
 
scale default arrangement, and
 
 
(b)
any other prescribed conditions are met.
20
 
(2)
The GPP meets the scale requirement by reference to a main scale
 
 
default arrangement if the sum of the values mentioned in paragraphs
 
 
(a) to (c) of subsection (4) is equal to or greater than the minimum
 
 
amount.
 
 
(3)
In this section “the minimum amount” means £25 billion.
25
 
(4)
Subject to subsections (5) and (6) , those values are—
 
 
(a)
the total value of assets of the GPP which—
 
 
(i)
represent accrued rights of members of the GPP,
 
 
(ii)
are held subject to the main scale default arrangement,
 
 
and
30
 
(iii)
are managed under a common investment strategy;
 
 
(b)
if one or more group personal pension schemes are connected
 
 
with the GPP, the total value of assets of those schemes that—
 
 
(i)
represent accrued rights of members of those schemes,
 
 
(ii)
are held subject to the main scale default arrangement,
35
 
and
 
 
(iii)
are managed under the investment strategy mentioned
 
 
in paragraph (a) (iii) ;
 
 
(c)
if one or more relevant Master Trusts are connected with the
 
 
GPP, the total value of assets of those schemes that—
40
 
(i)
represent accrued rights of members of that scheme,
 

Page 44

 
(ii)
are held subject to the main scale default arrangement,
 
 
and
 
 
(iii)
are managed under the investment strategy mentioned
 
 
in paragraph (a) (iii) .
 
 
(5)
Regulations may make provision about amounts that are to be excluded
5
 
or adjusted in calculating the total value under subsection (4) (a) to (c) .
 
 
(6)
Regulations may make provision about—
 
 
(a)
how the satisfaction of criteria relevant to the meeting of the
 
 
scale requirement is to be evidenced;
 
 
(b)
what it means for assets of a pension scheme to be managed
10
 
under a “common investment strategy” (including in particular
 
 
provision defining that expression by reference to whether or
 
 
how far the assets relating to each member of the scheme are
 
 
allocated in the same proportion to the same investments).
 
 
(7)
Regulations may make provision about how the value of assets is to
15
 
be determined for the purposes of subsections (2) and (4) .
 
 
(8)
A reference in subsection (4) to a group personal pension scheme or
 
 
a relevant Master Trust being “connected” with the GPP is to a group
 
 
personal pension scheme or a relevant Master Trust having a prescribed
 
 
connection with the GPP.
20
 
(9)
Regulations under subsection (8) may, for example, provide—
 
 
(a)
that a group personal pension scheme is connected with the
 
 
GPP only if it has the same provider as the GPP, or
 
 
(b)
that a relevant Master Trust is connected with the GPP only if
 
 
its scheme funder or scheme strategist is also the provider of
25
 
the GPP.
 
 
(10)
Regulations may make provision—
 
 
(a)
as to a time limit within which the Authority must decide an
 
 
application for approval;
 
 
(b)
as to procedures in connection with approvals or where an
30
 
approval has been given;
 
 
(c)
about the withdrawal of an approval, including conditions for
 
 
and procedures in connection with withdrawals;
 
 
(d)
for the Authority’s decision on the application, or on a decision
 
 
to withdraw approval, to be referred to the Upper Tribunal;
35
 
(e)
for the Authority to maintain and publish a list of group
 
 
personal pension schemes that are approved under this section.
 
 
(11)
Regulations under subsection (10) (c) may in particular make
 
 
provision—
 
 
(a)
about steps, including communications with a group personal
40
 
pension scheme, that the Authority must take before deciding
 
 
to withdraw an approval;
 

Page 45

 
(b)
setting a minimum period that must elapse between notification
 
 
that approval is to be withdrawn and the withdrawal of the
 
 
approval;
 
 
(c)
where the Authority has given notice to the provider of the
 
 
GPP that its approval is likely to be withdrawn and any other
5
 
prescribed conditions are met, requiring the provider to—
 
 
(i)
act in relation to the scheme as if its approval has been
 
 
withdrawn, and
 
 
(ii)
take steps for ensuring that persons (such as employers)
 
 
who may be affected in the event of the GPP losing
10
 
that approval are promptly informed if such a loss
 
 
should occur;
 
 
(d)
permitting the Authority to impose, on a person who fails to
 
 
comply with a requirement under paragraph (c) , a penalty
 
 
determined in accordance with the regulations that does not
15
 
exceed £100,000;
 
 
(e)
providing for the making of a reference to the First-tier Tribunal
 
 
or Upper Tribunal in respect of the issue of a penalty notice
 
 
or the amount of a penalty.
 
 
(12)
Before making regulations under this section the Secretary of State
20
 
must consult such persons as the Secretary of State considers
 
 
appropriate.
 
 
(13)
In this section “main scale default arrangement” means an
 
 
arrangement—
 
 
(a)
that is used for the purposes of one or more pension schemes,
25
 
and
 
 
(b)
subject to which assets of any one of those schemes must under
 
 
the rules of the scheme be held, or may under those rules be
 
 
held, if the member of the scheme to whom the assets relate
 
 
does not make a choice as to the arrangement subject to which
30
 
the assets are to be held.
 
28C
Approvals in respect of asset allocation
 
 
(1)
The Regulatory Authority (“the Authority”) may approve a relevant
 
 
Master Trust or a group personal pension scheme in respect of the
 
 
asset allocation requirement only if the Authority determines that at
35
 
least the prescribed percentage (by value) of the assets held in default
 
 
funds of the scheme are qualifying assets.
 
 
(2)
Regulations under subsection (1) may prescribe a percentage by
 
 
reference to—
 
 
(a)
all of the assets of the scheme that are held in default funds,
40
 
or
 
 
(b)
a prescribed description of the assets of the scheme that are so
 
 
held.
 

Page 46

 
(3)
Regulations under subsection (1) made after 31 December 2035 may
 
 
not increase the prescribed percentage.
 
 
(4)
In this section “qualifying asset” means an asset of a prescribed
 
 
description.
 
 
(5)
A description of asset prescribed under subsection (4) may for example
5
 
be—
 
 
(a)
private equity,
 
 
(b)
private debt,
 
 
(c)
venture capital, or
 
 
(d)
interests in land,
10
 
but (unless within any of the above paragraphs) may not be securities
 
 
listed on a recognised investment exchange within the meaning of the
 
 
Income Tax Acts (see section 1005 of the Income Tax Act 2007)
 
 
excluding those registered by the Financial Conduct Authority as an
 
 
SME growth market in accordance with the Market Conduct
15
 
sourcebook.
 
 
(6)
A description prescribed under subsection (4) may for example relate
 
 
to—
 
 
(a)
whether an asset is located in the United Kingdom or
 
 
elsewhere;
20
 
(b)
the presence or absence of other prescribed factors linking an
 
 
asset to economic activity in the United Kingdom.
 
 
(7)
For the purposes of this section assets of a relevant Master Trust or
 
 
group personal pension scheme are held in “default funds” if—
 
 
(a)
the jobholders by or in respect of whom contributions have
25
 
been made to the scheme have not (or predominantly have
 
 
not) expressed a choice as to where the contributions are
 
 
allocated, and
 
 
(b)
the arrangements under which the assets are held meet any
 
 
other conditions that may be prescribed.
30
 
(8)
Regulations may assign different descriptions of asset to different
 
 
fractions of the percentage prescribed under subsection (1) .
 
 
(9)
Regulations may make provision—
 
 
(a)
about how the meeting of the asset allocation requirement is
 
 
to be evidenced;
35
 
(b)
requiring the trustees or managers of relevant Master Trusts
 
 
or the providers of group personal pension schemes to have
 
 
regard to any guidance issued by the Secretary of State about
 
 
the effect of any regulations under this section.
 
 
(10)
Regulations may make provision—
40
 
(a)
as to a time limit within which the Authority must decide an
 
 
application for approval;
 

Page 47

 
(b)
as to procedures in connection with approvals or where an
 
 
approval has been given;
 
 
(c)
about the period for which an approval has effect;
 
 
(d)
about the withdrawal of an approval, including conditions for
 
 
and procedures in connection with withdrawals;
5
 
(e)
about the provision to the Authority of information required
 
 
for the purposes of deciding applications (including any
 
 
additional information the Authority may require in a particular
 
 
case);
 
 
(f)
requiring the Authority to report to the Secretary of State any
10
 
information the Secretary of State may require relating to the
 
 
allocation of assets by relevant Master Trusts or group personal
 
 
pension schemes;
 
 
(g)
for the Authority’s decision on the application to be referred
 
 
to the Upper Tribunal;
15
 
(h)
for the Authority to maintain and publish—
 
 
(i)
a list of relevant Master Trusts that are approved under
 
 
this section, and
 
 
(ii)
a list of group personal pension schemes that are
 
 
approved under this section,
20
 
(or a single list of the pension schemes mentioned in
 
 
sub-paragraphs (i) and (ii)).
 
 
(11)
Regulations under subsection (10) (d) may in particular make
 
 
provision—
 
 
(a)
about steps, including communications with a relevant Master
25
 
Trust or group personal pension scheme, that the Authority
 
 
must take before deciding to withdraw an approval;
 
 
(b)
setting a minimum period that must elapse between notification
 
 
that approval is to be withdrawn and the withdrawal of the
 
 
approval;
30
 
(c)
where the Authority has given notice to the trustees or
 
 
managers of a relevant Master Trust or the provider of a group
 
 
personal pension that its approval is likely to be withdrawn
 
 
and any other prescribed conditions are met, requiring the
 
 
trustees or managers or provider to—
35
 
(i)
act in relation to the scheme as if its approval has been
 
 
withdrawn, and
 
 
(ii)
take steps for ensuring that persons (such as employers)
 
 
who may be affected in the event of the scheme losing
 
 
that approval are promptly informed if such a loss
40
 
should occur;
 
 
(d)
permitting the Authority to impose, on a person who fails to
 
 
comply with a requirement under paragraph (c) , a penalty
 
 
determined in accordance with the regulations that does not
 
 
exceed £100,000.
45

Page 48

 
(12)
Before making the first set of regulations under subsection (1) the
 
 
Secretary of State must prepare and publish a report regarding—
 
 
(a)
how the financial interests of members of relevant Master Trusts
 
 
and group personal pension schemes are or would be affected
 
 
by the proposed regulations;
5
 
(b)
what effects the proposed measures could be expected to have
 
 
on economic growth in the United Kingdom;
 
 
(c)
any other matters the Secretary of State considers appropriate.
 
 
(13)
Before making regulations under this section, the Secretary of State
 
 
must consult the Treasury.
10
 
(14)
The Secretary of State must consult such persons as the Secretary of
 
 
State considers appropriate before publishing a report under subsection
 
 
(12) .
 
 
(15)
Provision under this section overrides any provision of the trust deed
 
 
or rules of the scheme in question, so far as they are in conflict (and
15
 
for that purpose, a provision of the trust deed or rules of the scheme
 
 
is “in conflict” with provision under this section so far as the former
 
 
does not allow for the assets of the scheme to be managed in such a
 
 
way as to meet the conditions for approval under this section).
 
28D
Information
20
 
(1)
Regulations may make provision about information that the trustees
 
 
or managers of a relevant Master Trust or the provider of a group
 
 
personal pension scheme must give to the Regulatory Authority about
 
 
the allocation of assets of the relevant Master Trust or group personal
 
 
pension scheme.
25
 
(2)
The regulations may make provision about—
 
 
(a)
the types of information that must be given;
 
 
(b)
when it must be given;
 
 
(c)
the form and manner in which it must be given.
 
28E
Transition pathway relief
30
 
(1)
The Regulatory Authority (“the Authority”) may approve a relevant
 
 
Master Trust as qualifying for transition pathway relief if the Authority
 
 
determines that—
 
 
(a)
the condition in subsection (2) is met, and
 
 
(b)
any other prescribed conditions are met.
35
 
(2)
The condition mentioned in subsection (1) (a) is that the Authority
 
 
determines that the relevant Master Trust—
 
 
(a)
would qualify for approval under section 28A (MSDA approval)
 
 
if the amount specified in section 28A (3) were £10 billion, and
 

Page 49

 
(b)
has a credible plan in place for meeting the scale requirement
 
 
within the meaning of section 28A (2) .
 
 
(3)
The Authority may approve a group personal pension scheme as
 
 
qualifying for transition pathway relief if the Authority determines
 
 
that—
5
 
(a)
the condition in subsection (4) is met, and
 
 
(b)
any other prescribed conditions are met.
 
 
(4)
The condition mentioned in subsection (3) (a) is that the Authority
 
 
determines that the group personal pension scheme—
 
 
(a)
would qualify for approval under section 28B (MSDA approval:
10
 
group personal pension schemes) if the amount specified in
 
 
section 28B (3) were £10 billion, and
 
 
(b)
has a credible plan in place for meeting the scale requirement
 
 
within the meaning of section 28B (2) .
 
 
(5)
Regulations may require trustees or managers of schemes that are
15
 
authorised under this section to take prescribed steps, for example—
 
 
(a)
to produce plans for increasing the scale of their schemes’
 
 
holdings or to take other actions that may facilitate progress
 
 
towards approval under section 28A or 28B , or
 
 
(b)
in connection with governance and investment capability.
20
 
(6)
Regulations must make provision about the criteria for making any
 
 
determinations under subsection (1) or (3) .
 
 
(7)
Regulations may make provision—
 
 
(a)
as to a time limit within which the Authority must decide an
 
 
application;
25
 
(b)
as to procedures in connection with approvals or where an
 
 
approval has been given;
 
 
(c)
for the Authority’s decision on the application to be referred
 
 
to the Upper Tribunal;
 
 
(d)
for the Authority to maintain and publish a list of schemes
30
 
that are approved under this section.
 
 
(8)
Before making regulations under this section the Secretary of State
 
 
must consult such persons as the Secretary of State considers
 
 
appropriate.
 
 
(9)
In this section “relevant Master Trust” has the same meaning as in
35
 
section 20.
 
28F
New entrant pathway relief
 
 
(1)
A relevant Master Trust or group personal pension scheme qualifies
 
 
for new entrant pathway relief for the purposes of Condition 1 (e) of
 
 
section 20(1A) or section 26 (7C) (c) if the relevant Master Trust or group
40

Page 50

 
personal pension scheme is approved by the Regulatory Authority
 
 
(“the Authority”) under this section.
 
 
(2)
The Authority may approve a relevant Master Trust or a group
 
 
personal pension scheme under this section only if the Authority
 
 
determines that—
5
 
(a)
the scheme in question does not yet have any members,
 
 
(b)
the scheme in question has strong potential to grow so as to
 
 
meet the scale requirement under section 28A or 28B ,
 
 
(c)
the scheme in question has an innovative product design, and
 
 
(d)
any other prescribed conditions are met.
10
 
(3)
Regulations may make provision—
 
 
(a)
as to a time limit within which the Authority must decide an
 
 
application;
 
 
(b)
as to procedures in connection with approvals or where an
 
 
approval has been given;
15
 
(c)
for the Authority’s decision on the application to be referred
 
 
to the Upper Tribunal;
 
 
(d)
for the Authority to maintain a list of relevant Master Trusts
 
 
or group personal pension schemes that are approved under
 
 
this section.
20
 
(4)
Regulations may make provision about the meaning of “strong
 
 
potential to grow” and “innovative product design” (including how
 
 
it can be demonstrated that a scheme has strong potential to grow or
 
 
an innovative product design).
 
 
(5)
Before making regulations under this section the Secretary of State
25
 
must consult such persons as the Secretary of State considers
 
 
appropriate.
 
28G
Suspension of asset allocation requirement: savers’ interest test
 
 
(1)
Regulations must make provision for authorising the Regulatory
 
 
Authority (“the Authority”), on an application by a relevant Master
30
 
Trust or group personal pension scheme, to determine that the scheme
 
 
in question is to be treated, for a period specified by the Authority,
 
 
as if that scheme were exempted from the requirement for approval
 
 
under section 28C .
 
 
(2)
The Secretary of State must make regulations under subsection (1) so
35
 
that they have effect whenever regulations under section 28C(1) or (2)
 
 
have effect.
 
 
(3)
Regulations under subsection (1) —
 
 
(a)
must provide that the Authority may not determine that the
 
 
applicant is to be treated as mentioned in subsection (1) unless
40
 
the Authority is of the view that meeting the asset allocation
 

Page 51

 
requirement would cause material financial detriment to
 
 
members of the scheme;
 
 
(b)
may make provision about the basis on which the Authority
 
 
may or must form such a view, including about the evidence
 
 
which the Authority may or must take into account;
5
 
(c)
may make provision as to the process for making a
 
 
determination, including as to—
 
 
(i)
the level of detail of enquiry required in different cases;
 
 
(ii)
a time limit within which the Authority must decide
 
 
an application;
10
 
(iii)
procedures in connection with applications;
 
 
(d)
must provide for the Authority’s determination on an
 
 
application to be referred to the Upper Tribunal.
 
 
(4)
Regulations under subsection (1) may make provision about what is,
 
 
or is not, to be regarded as material financial detriment for the
15
 
purposes of this section.
 
28H
Risk notices
 
 
(1)
The Regulatory Authority (“the Authority”) may give a risk notice to
 
 
the trustees or managers of a relevant Master Trust if the Authority
 
 
considers that—
20
 
(a)
there is an issue of concern in relation to the relevant Master
 
 
Trust, and
 
 
(b)
the relevant Master Trust will, or is likely to, cease to meet the
 
 
conditions for approval under section 28A or 28C if the issue
 
 
is not resolved.
25
 
(2)
A “risk notice” is a notice that requires the trustees or managers of a
 
 
relevant Master Trust to submit to the Authority a plan (a “resolution
 
 
plan”) setting out proposals for resolving the issue of concern.
 
 
(3)
A risk notice must—
 
 
(a)
identify the issue of concern;
30
 
(b)
specify the date by which the resolution plan is to be submitted.
 
 
(4)
If the Authority is not satisfied that the proposals in a resolution plan
 
 
are likely to be adequate to resolve the issue of concern, the Authority
 
 
may give a further notice to the trustees or managers requiring them
 
 
to submit a revised plan by a date specified in the notice.
35
 
(5)
The trustees or managers must implement the proposals in a resolution
 
 
plan if the Authority—
 
 
(a)
is satisfied that the proposals are likely to be adequate to
 
 
resolve the issue of concern, and
 
 
(b)
notifies the trustees or managers accordingly.
40

Page 52

 
(6)
The Authority may direct the trustees or managers to comply with
 
 
the requirement imposed by subsection (5) .
 
 
(7)
Where the trustees or managers are required by subsection (5) to
 
 
implement the proposals in a resolution plan, they must—
 
 
(a)
submit to the Authority, before the end of a period specified
5
 
in regulations, a report setting out what progress they are
 
 
making in implementing the proposals (a “progress report”);
 
 
(b)
submit further progress reports to the Authority at intervals
 
 
specified by the Authority.
 
 
(8)
Resolution plans and progress reports must be provided in the manner
10
 
and form specified by the Authority.
 
 
(9)
A reference to a resolution plan in subsections (4) to (8) includes a
 
 
reference to a resolution plan as revised under subsection (4) .
 
 
(10)
Regulations may—
 
 
(a)
specify information that a risk notice must contain;
15
 
(b)
provide that the date referred to in subsection (3) (b) or (4) must
 
 
fall before the end of a period specified in the regulations.
 
 
(11)
Section 10 of the Pensions Act 1995 (civil penalties) applies to a trustee
 
 
or manager of a relevant Master Trust who fails to comply with—
 
 
(a)
a notice under subsection (1) or (4) ,
20
 
(b)
a direction under subsection (6) , or
 
 
(c)
a requirement imposed by subsection (7) .
 
28I
Penalties
 
 
(1)
Regulations may make provision about the imposition by the
 
 
Regulatory Authority of a penalty on the trustees or managers of a
25
 
relevant Master Trust or the provider of a group personal pension
 
 
scheme where the scheme—
 
 
(a)
fails to meet the condition in section 20 (1A) by virtue of not
 
 
being approved under section 28A or 28C , and
 
 
(b)
accepts contributions from an employer in relation to a
30
 
jobholder on the basis that it is an automatic enrolment scheme
 
 
in relation to that jobholder.
 
 
(2)
Regulations may make provision about the imposition by the
 
 
Regulatory Authority of a penalty on the provider of a group personal
 
 
pension scheme where the scheme—
35
 
(a)
fails to meet the condition in section 26 (7A) or (7B) , and
 
 
(b)
accepts contributions from an employer in relation to a
 
 
jobholder on the basis that it is an automatic enrolment scheme
 
 
in relation to that jobholder.
 
 
(3)
The regulations must provide—
40

Page 53

 
(a)
that a penalty must not exceed £100,000 in relation to each
 
 
employer from which contributions are accepted as mentioned
 
 
in subsection (1) (b) or (2) (b) , and
 
 
(b)
that there is a right of appeal against the imposition of the
 
 
penalty.
5
28J
Enforcement by the Financial Conduct Authority
 
 
(1)
The Treasury may make regulations to enable the Financial Conduct
 
 
Authority to take action (in addition to any action it may otherwise
 
 
take under the Financial Services and Markets Act 2000) for monitoring
 
 
and enforcing compliance of any FCA-regulated person with any
10
 
provision of or under this Chapter.
 
 
(2)
The regulations may apply, or make provision corresponding to—
 
 
(a)
provision made by or under this Part in relation to the
 
 
Regulatory Authority, or
 
 
(b)
any provision of the Financial Services and Markets Act 2000,
15
 
with or without modification.
 
 
(3)
In this section, “FCA-regulated person” means an authorised person
 
 
(within the meaning of the Financial Services and Markets Act 2000).”
 
 
(13)
Before section 31 insert—
 
“30A
Review of exercise of powers under
20
 
(1)
The Secretary of State must—
 
 
(a)
review the effects of any regulations under section 28C
 
 
(approvals in respect of asset allocation), and
 
 
(b)
prepare, publish and lay before Parliament, a report of the
 
 
review.
25
 
(2)
A review under subsection (1) must be conducted before the end of
 
 
the period of 5 years beginning with the day on which the regulations
 
 
in question come into force.
 
 
(3)
In carrying out the review the Secretary of State must take the
 
 
following into account—
30
 
(a)
whether and how the financial interests of members of Master
 
 
Trust schemes and savers in group personal pension schemes
 
 
have been affected by the regulations;
 
 
(b)
the effects (if any) of the measures on economic growth in the
 
 
United Kingdom;
35
 
(c)
any other matters the Secretary of State considers appropriate.”
 
 
(14)
In section 99 (interpretation of Part)—
 
 
(a)
the existing words become subsection (1);
 
 
(b)
in that subsection, at the appropriate places insert—
 

Page 54

 
“ “group personal pension scheme” means a personal pension
 
 
scheme which is available, or intended to be available, to
 
 
employees of the same employer or of employers within a
 
 
group, but does not include—
 
 
(a)
a stakeholder pension scheme (as defined in section 1
5
 
of the Welfare Reform and Pensions Act 1999), or
 
 
(b)
any pension scheme that requires all its members to
 
 
make a choice as to how their contributions are
 
 
invested;”;
 
 
“ “Regulatory Authority” has the meaning given by regulations
10
 
under subsection (2);”;
 
 
“ “relevant Master Trust” has the meaning given by section 20(4);”;
 
 
(c)
after that subsection insert—
 
 
“(2)
The Secretary of State may by regulations define “Regulatory
 
 
Authority” for the purposes of this Part.”
15
 
(15)
In section 143 (orders and regulations), in subsection (5)(a)—
 
 
(a)
after “17(1)(c),” insert “20, 26 (7A) , (7B) , (7C) or (7E) ,”;
 
 
(b)
after “28,” insert “ 28A , 28B , 28C (other than subsection (10) (f) ), 28E ,
 
 
28F , 28G , 28I , 28J ,”.
 
 
(16)
The following provisions of the Pensions Act 2008 (which relate to transition
20
 
pathway relief) are repealed at the end of the period of 5 years beginning
 
 
with the day on which the provisions mentioned in paragraphs (a) and (b)
 
 
come into force—
 
 
(a)
paragraph (d) of Condition 1 in section 20 (1A) ;
 
 
(b)
section 26 (7C) (b) ;
25
 
(c)
section 28E ;
 
 
(d)
the word “ 28E ” in section 143(5)(a).
 
 
(17)
If this section is repealed under section 122 (6) (repeal where asset allocation
 
 
requirement uncommenced) in respect of the insertion of the provisions
 
 
mentioned in that subsection, the Secretary of State may by regulations amend
30
 
this section in consequence of that repeal.
 
 
(18)
Regulations under subsection (17) are subject to the negative procedure.
 
41
Amendments related to
 
 
(1)
The Financial Services and Markets Act 2000 is amended as follows.
 
 
(2)
In section 1A (the Financial Conduct Authority), in subsection (6), after
35
 
paragraph (a) insert—
 
 
“(aa)
the Pensions Act 2008,”.
 
 
(3)
Section 204A (meaning of “relevant requirement” and “appropriate regulator”
 
 
is amended as follows.
 

Page 55

 
(4)
In subsection (2), after paragraph (aa) insert—
 
 
“(aza)
by or under Part 1 of the Pensions Act 2008 in relation to the
 
 
scale requirement in section 28B or the asset allocation
 
 
requirement in section 28C ,”.
 
 
(5)
In subsection (6), after paragraph (a) insert—
5
 
“(aza)
by or under Part 1 of the Pensions Act 2008 in relation to the
 
 
scale requirement in section 28B or the asset allocation
 
 
requirement in section 28C ,”.
 
 
(6)
Part 1 (Master Trusts) of the Pension Schemes Act 2017 is amended as follows.
 
 
(7)
In section 5 (decision on application), in subsection (3)—
10
 
(a)
omit the “and” before paragraph (e);
 
 
(b)
after paragraph (e) insert—
 
 
“(f)
that it has sufficient investment capability (see section
 
 
12A), and
 
 
(g)
(in the case of an applicant that has its main
15
 
administration in the United Kingdom) that the scheme
 
 
meets Condition 1 of section 20(1A) (scale requirement)
 
 
of the Pensions Act 2008.”
 
 
(8)
After section 12 insert—
 
“12A
Investment capability
20
 
(1)
This section applies for the purposes of enabling the Pensions Regulator
 
 
to decide whether it is satisfied that a Master Trust scheme (that has
 
 
its main administration in the United Kingdom) has sufficient
 
 
investment capability (see section 5(3)(f)).
 
 
(2)
In order to be satisfied that the Master Trust scheme has sufficient
25
 
investment capability the Pensions Regulator must be satisfied—
 
 
(a)
that appropriate systems are in place for managing the
 
 
investment strategy and monitoring outcomes,
 
 
(b)
that the scheme has appropriate systems for delivering effective
 
 
governance, and
30
 
(c)
that there are appropriate strategies for recruiting and retaining
 
 
expert staff.
 
 
(3)
In deciding whether it is satisfied about the matters mentioned in
 
 
subsection (1) , the Pensions Regulator must take account of any factors
 
 
specified in subsection (2) .
35
 
(4)
The Secretary of State may by regulations—
 
 
(a)
make provision about the meaning of terms used in subsection
 
 
(2) ;
 

Page 56

 
(b)
specify further factors that the Pensions Regulator must take
 
 
into account in deciding whether it is satisfied about the matters
 
 
mentioned in subsection (1) .
 
 
(5)
The first regulations that are made under this section are subject to
 
 
affirmative resolution procedure.
5
 
(6)
Any other regulations under this section are subject to negative
 
 
resolution procedure.
 
12B
Scale requirement
 
 
(1)
The Secretary of State may by regulations make provision about how
 
 
the Pensions Regulator is to decide whether it is satisfied that a Master
10
 
Trust scheme that has its main administration in the United Kingdom
 
 
meets Condition 1 in section 20 (1A) (scale requirement) of the Pensions
 
 
Act 2008.
 
 
(2)
The regulations may, among other things, specify matters which the
 
 
Pensions Regulator must take into account in making its assessment.
15
 
(3)
The first regulations under this section are subject to affirmative
 
 
resolution procedure.
 
 
(4)
Any subsequent regulations under this section are subject to negative
 
 
resolution procedure.”
 

Chapter 4

20

Default arrangements

 
42
Regulations restricting creation of new non-scale default arrangements
 
 
(1)
The appropriate authority may make regulations for the purpose of restricting
 
 
the ability of the provider of a pension scheme to begin operating a non-scale
 
 
default arrangement.
25
 
(2)
The regulations may, in particular, make provision—
 
 
(a)
prohibiting the provider of a pension scheme from beginning to operate
 
 
a non-scale default arrangement unless the arrangement is approved
 
 
by the appropriate regulator;
 
 
(b)
about the criteria which the appropriate regulator must apply in
30
 
deciding whether to approve a non-scale default arrangement;
 
 
(c)
about the conditions which the appropriate regulator may or must
 
 
attach to approval;
 
 
(d)
about the ongoing requirements to which the provider of a pension
 
 
scheme is to be subject in relation to a non-scale default arrangement
35
 
approved under the regulations;
 
 
(e)
where assets of a pension scheme are held subject to a non-scale default
 
 
arrangement that is being operated in breach of the regulations,
 

Page 57

 
requiring the provider of the pension scheme in question to ensure
 
 
that the assets are held subject to a different arrangement of a
 
 
description specified in the regulations;
 
 
(f)
conferring functions on the appropriate regulator, including functions
 
 
involving the exercise of a discretion;
5
 
(g)
for ensuring compliance with the regulations, including provision for
 
 
the imposition of civil penalties not exceeding £100,000;
 
 
(h)
for the making of a reference to the First-tier Tribunal or Upper
 
 
Tribunal in respect of anything done under the regulations.
 
 
(3)
Regulations under this section are subject to the affirmative procedure.
10
43
Review in relation to non-scale default arrangements
 
 
(1)
The Secretary of State and the Treasury (“the reviewers”), acting jointly, must
 
 
carry out a review of the non-scale default arrangements operated by providers
 
 
of pension schemes.
 
 
(2)
The review must consider the following (as well as any other matters that
15
 
the reviewers consider relevant)—
 
 
(a)
the number of non-scale default arrangements being operated by
 
 
providers;
 
 
(b)
the extent to which non-scale default arrangements operated by
 
 
providers have been consolidated, or are likely to be consolidated,
20
 
into approved main scale default arrangements;
 
 
(c)
where non-scale default arrangements have not been so consolidated,
 
 
the reasons why;
 
 
(d)
the circumstances in which it may be appropriate for non-scale default
 
 
arrangements not to be so consolidated.
25
 
(3)
The reviewers must publish a report on the review as soon as reasonably
 
 
practicable after the review is completed.
 
 
(4)
The Pensions Regulator and the FCA must provide such information and
 
 
assistance as the reviewers may require for the purposes of the review.
 
 
(5)
Neither section 348 of the Financial Services and Markets Act 2000 nor section
30
 
82 of the Pensions Act 2004 prohibits the disclosure by the reviewers, the
 
 
Pensions Regulator or the FCA of any information where the disclosure is
 
 
made for the purpose of enabling or facilitating any person’s compliance with
 
 
this section.
 
44
Regulations about consolidation of non-scale default arrangements
35
 
(1)
The appropriate authority may make regulations about the consolidation of
 
 
non-scale default arrangements into approved main scale default arrangements.
 
 
(2)
The regulations may, in particular, make provision—
 
 
(a)
requiring the provider of a pension scheme, subject to any exemptions
 
 
specified in the regulations, to consolidate a non-scale default
40

Page 58

 
arrangement operated by it into an approved main scale default
 
 
arrangement operated by it;
 
 
(b)
requiring the provider of a pension scheme to prepare, and provide
 
 
the appropriate regulator with, an action plan about how and when
 
 
a non-scale default arrangement operated by it is to be so consolidated;
5
 
(c)
conferring functions on the appropriate regulator, including functions
 
 
involving the exercise of a discretion;
 
 
(d)
for ensuring compliance with the regulations, including provision for
 
 
the imposition of civil penalties not exceeding £100,000;
 
 
(e)
for the making of a reference to the First-tier Tribunal or Upper
10
 
Tribunal in respect of a decision made under the regulations.
 
 
(3)
Regulations under this section—
 
 
(a)
may not be made until the review under section 43 has been completed
 
 
and the report on it published, and
 
 
(b)
must take account of the review’s conclusions.
15
 
(4)
Regulations under this section are subject to the affirmative procedure.
 
45
Amendments of the Financial Services and Markets Act 2000
 
 
(1)
The Financial Services and Markets Act 2000 is amended as follows.
 
 
(2)
In section 1A (the Financial Conduct Authority), in subsection (6), before
 
 
paragraph (ca) insert—
20
 
“(cze)
Chapter 4 of Part 2 of the Pension Schemes Act 2025 (default
 
 
arrangements);”.
 
 
(3)
In section 204A (meaning of “relevant requirement” and “appropriate
 
 
regulator”)—
 
 
(a)
in subsection (2), before paragraph (b) insert—
25
 
“(ad)
by or under Chapter 4 of Part 2 of the Pension Schemes
 
 
Act 2025 (default arrangements),”;
 
 
(b)
in subsection (6), before paragraph (b) insert—
 
 
“(ad)
by or under Chapter 4 of Part 2 of the Pension Schemes
 
 
Act 2025 (default arrangements);”.
30
46
Crown application
 
 
(1)
This Chapter applies to a pension scheme managed by or on behalf of the
 
 
Crown as it applies to other pension schemes.
 
 
(2)
Accordingly, references in this Chapter to a person in their capacity as a
 
 
trustee or manager of a pension scheme include the Crown, or a person acting
35
 
on behalf of the Crown, in that capacity.
 
 
(3)
This Chapter applies to persons employed by or under the Crown as it applies
 
 
to persons employed by a private person.
 

Page 59

47
Interpretation of Chapter
 
 
(1)
In this Chapter—
 
 
“the appropriate authority” , in relation to the making of regulations,
 
 
means—
 
 
(a)
where the only pension schemes to which the regulations apply
5
 
are FCA-regulated pension schemes, the Treasury;
 
 
(b)
where the only pension schemes to which the regulations apply
 
 
are not FCA-regulated pension schemes, the Secretary of State;
 
 
(c)
in any other case, the Treasury and the Secretary of State acting
 
 
jointly;
10
 
“the appropriate regulator” , in relation to a pension scheme, means—
 
 
(a)
in relation to an FCA-regulated pension scheme, the FCA;
 
 
(b)
in relation to any other pension scheme, the Pensions Regulator;
 
 
“approved main scale default arrangement” , in relation to a pension
 
 
scheme, means a main scale default arrangement in respect of which
15
 
the pension scheme is approved under section 28A or 28B of the
 
 
Pensions Act 2008;
 
 
“consolidating” a non-scale default arrangement into an approved main
 
 
scale default arrangement means ensuring that any assets held subject
 
 
to the non-scale default arrangement are instead held subject to the
20
 
approved main scale default arrangement;
 
 
“the FCA” means the Financial Conduct Authority;
 
 
“FCA-regulated” , in relation to a pension scheme, has the meaning given
 
 
in subsection (2) ;
 
 
“main scale default arrangement” , in relation to a pension scheme, has
25
 
the same meaning as in section 28A and 28B of the Pensions Act 2008;
 
 
“money purchase benefits” has the same meaning as in the Pension
 
 
Schemes Act 1993 (see section 181 of that Act);
 
 
“non-scale default arrangement” , in relation to a pension scheme, means
 
 
an arrangement—
30
 
(a)
which is not an approved main scale default arrangement, and
 
 
(b)
subject to which assets of the scheme must under the rules of
 
 
the scheme be held, or may under those rules be held, if the
 
 
member of the scheme to whom the assets relate does not make
 
 
a choice as to the arrangement subject to which the assets are
35
 
to be held;
 
 
“operate” , in relation to a default arrangement, has the meaning given
 
 
in subsection (3) ;
 
 
“pension scheme” has the meaning given by section 1(5) of the Pension
 
 
Schemes Act 1993;
40
 
“the provider” of a pension scheme means—
 
 
(a)
in relation to an FCA-regulated pension scheme, the person
 
 
mentioned in subsection (2) (b) ;
 
 
(b)
in any other case, the trustees or managers;
 
 
“the trustees or managers” , in relation to a pension scheme, means—
45

Page 60

 
(a)
in the case of a scheme established under a trust, the trustees
 
 
of the scheme, and
 
 
(b)
in any other case, the persons responsible for the management
 
 
of the scheme.
 
 
(2)
A pension scheme is “FCA-regulated” if the operation of the scheme—
5
 
(a)
is carried on in such a way as to be a regulated activity for the
 
 
purposes of the Financial Services and Markets Act 2000, and
 
 
(b)
is carried on in the United Kingdom by a person who is in relation
 
 
to that activity an authorised person under section 19 of that Act.
 
 
(3)
The provider of a pension scheme “operates” a non-scale default arrangement
10
 
or main scale default arrangement if any assets held for the purposes of the
 
 
scheme are held subject to the non-scale default arrangement or main scale
 
 
default arrangement.
 

Chapter 5

 

FCA-regulated pension schemes: contractual override

15
48
FCA-regulated pension schemes: contractual override
 
 
(1)
The Financial Services and Markets Act 2000 is amended as follows.
 
 
(2)
After Part 7 insert—
 

Part 7A

 
 
Unilateral changes to pension schemes
20
117A
Pension schemes to which this Part applies
 
 
(1)
This Part applies to a pension scheme—
 
 
(a)
that is FCA-regulated, and
 
 
(b)
in relation to which any of the following conditions is met.
 
 
(2)
The conditions are—
25
 
(a)
that the scheme is an auto-enrolment scheme;
 
 
(b)
that the scheme is a workplace personal pension scheme that
 
 
is not an auto-enrolment scheme;
 
 
(c)
that the scheme is a pension scheme of a prescribed description.
 
 
(3)
For the purposes of subsection (2) (a) and (b) a pension scheme is an
30
 
“auto-enrolment scheme” if any individual is or at any time was an
 
 
active member of the scheme in consequence of arrangements under
 
 
section 3 (2) , 5 (2) or 7 (3) of the Pensions Act 2008 or section 3(2), 5(2)
 
 
or 7(3) of the Pensions (No. 2) Act (Northern Ireland) 2008 (c. 13 (N.I.))
 
 
(arrangements for jobholder to become active member of automatic
35
 
enrolment scheme).
 

Page 61

 
(4)
In subsection (3) “active member” means an active member within the
 
 
meaning of Part 1 of the Pensions Act 2008 (see section 99 of that Act)
 
 
or Part 1 of the Pensions (No. 2) Act (Northern Ireland) 2008 (c. 13
 
 
(N.I.)) (see section 78 of that Act).
 
 
(5)
For the purposes of subsection (2) (b) a pension scheme is a “workplace
5
 
personal pension scheme” if—
 
 
(a)
the scheme is a personal pension scheme,
 
 
(b)
direct payment arrangements exist, or have at any time existed,
 
 
in relation to the scheme, and
 
 
(c)
contributions have been paid under the arrangements in respect
10
 
of, or on behalf of, two or more employees.
 
 
(6)
In subsection (5) “direct payment arrangements” means direct payment
 
 
arrangements within the meaning of section 111A of the Pension
 
 
Schemes Act 1993 or section 107A of the Pension Schemes (Northern
 
 
Ireland) Act 1993.
15
117B
Unilateral changes
 
 
(1)
The provider of a pension scheme to which this Part applies may—
 
 
(a)
amend the terms of the scheme as regards a description of
 
 
pension pot held by the scheme,
 
 
(b)
change the investments comprised in a description of pension
20
 
pot held by the scheme,
 
 
(c)
transfer a description of pension pot held by the scheme to a
 
 
different pension scheme operated by the same provider, or
 
 
(d)
transfer a description of pension pot held by the scheme to a
 
 
pension scheme operated by a different provider.
25
 
(2)
A change or transfer within subsection (1) (b) to (d) may be effected
 
 
notwithstanding that it breaches a term of the pension scheme (such
 
 
as a requirement for consent); and any such breach is to be disregarded
 
 
for all purposes.
 
 
(3)
Subsection (1) is subject to—
30
 
(a)
subsection (5) , sections 117D to 117F and any regulations under
 
 
section 117H (1) (c) , and
 
 
(b)
any other provision of legislation (including any rule) which
 
 
restricts or otherwise affects the provider’s power to do
 
 
anything within subsection (1) .
35
 
(4)
In subsection (1) (c) and (d) , a reference to a pension scheme to which
 
 
a description of pension pot may be transferred includes a pension
 
 
scheme to which this Part does not apply.
 
 
(5)
A transfer to a pension scheme operated by a different provider may
 
 
not be effected under subsection (1) (d) without the consent of that
40
 
provider.
 

Page 62

 
(6)
A reference in this Part to the terms of a pension scheme is to the
 
 
terms of any instrument or agreement—
 
 
(a)
in which the scheme is comprised, or
 
 
(b)
to which the provider of the scheme and any member are
 
 
parties in connection with the scheme.
5
 
(7)
In this Part, “unilateral change” means an amendment, change or
 
 
transfer within any of paragraphs (a) to (d) of subsection (1) .
 
117C
Effect of transfer of pension pot on membership of scheme etc
 
 
(1)
This section applies where a pension pot is transferred under section
 
 
117B (1) (c) or (d) to a different pension scheme (“the receiving scheme”).
10
 
(2)
The individual—
 
 
(a)
becomes a member of the receiving scheme in relation to the
 
 
pot, and
 
 
(b)
in a case in which there is more than one arrangement under
 
 
the receiving scheme, becomes, in relation to the pot, a member
15
 
of the arrangement specified in the unilateral change notice
 
 
under section 117F (3) (b) ;
 
 
and acquires the rights, and becomes subject to the obligations, of
 
 
membership.
 
 
(3)
Where being a member of the receiving scheme in relation to the pot,
20
 
or of the arrangement under the receiving scheme under which the
 
 
pot is to be held, entails being a party to a contract with the provider
 
 
of the receiving scheme, a contract is treated as entered into between
 
 
the individual and the provider—
 
 
(a)
at the time at which the pension pot is transferred to the
25
 
receiving scheme, and
 
 
(b)
on the terms communicated to the individual in the unilateral
 
 
change notice under section 117F (3) (c) .
 
117D
Best interests test
 
 
(1)
The provider of a pension scheme to which this Part applies may effect
30
 
a unilateral change under section 117B (1) only if—
 
 
(a)
the provider concludes, before doing so, that the best interests
 
 
test is met in relation to the unilateral change, and
 
 
(b)
it is reasonable for the provider to have reached that conclusion
 
 
at that time.
35
 
(2)
“The best interests test”, in relation to a unilateral change, is that it is
 
 
reasonably likely that effecting it will achieve—
 
 
(a)
a better outcome for the directly affected members of the
 
 
scheme (taken as a whole), and
 

Page 63

 
(b)
no worse an outcome for the other members of the scheme
 
 
(taken as a whole),
 
 
than the relevant alternative action or, where there is more than one
 
 
alternative action, each of them.
 
 
(3)
For the purposes of this Part, the members of a pension scheme who
5
 
are “directly affected” by a unilateral change are the members for
 
 
whom the scheme holds pension pots of the description in question.
 
 
(4)
The following are “relevant alternative actions” for the purposes of
 
 
subsection (2) in relation to a unilateral change—
 
 
(a)
not effecting the unilateral change, and
10
 
(b)
where the unilateral change is an internal change, each other
 
 
internal change that could be made in accordance with this
 
 
Part in relation to pension pots of the description in question.
 
 
(5)
In subsection (4) “internal change” means a unilateral change that
 
 
results in a description of pension pot held by the scheme being held—
15
 
(a)
subject to a different arrangement under the same scheme, or
 
 
(b)
subject to a particular arrangement under a different pension
 
 
scheme operated by the same provider (including where there
 
 
is only one arrangement under that scheme).
 
 
(6)
The FCA must make general rules specifying considerations or
20
 
information that must be taken into account in determining whether
 
 
the best interests test is met.
 
117E
Certification by independent person
 
 
(1)
The provider of a pension scheme to which this Part applies may effect
 
 
a unilateral change under section 117B (1) only if, before effecting it—
25
 
(a)
the provider has appointed a person to review the proposed
 
 
unilateral change, and
 
 
(b)
the person appointed has given the provider a certificate under
 
 
this section in relation to the proposed unilateral change.
 
 
(2)
The person appointed must—
30
 
(a)
be independent of the provider, and
 
 
(b)
have such expertise as is specified in general rules made by
 
 
the FCA.
 
 
(3)
The certificate must certify that, in the opinion of the independent
 
 
person—
35
 
(a)
the pension scheme is a pension scheme to which this Part
 
 
applies,
 
 
(b)
the proposed unilateral change is within section 117B (1) (a) to
 
 
(d) ,
 
 
(c)
section 117B (1) is not disapplied in relation to the proposed
40
 
unilateral change by regulations under section 117H (1) (a) ,
 

Page 64

 
(d)
any conditions prescribed under section 117H (1) (c) are met,
 
 
(e)
the best interests test is met in relation to the proposed
 
 
unilateral change, and
 
 
(f)
the provider has complied with such other requirements as
 
 
may be specified in general rules made by the FCA.
5
 
(4)
The FCA must make general rules about appointments and certification
 
 
under this section, including provision—
 
 
(a)
for determining for the purposes of this section whether a
 
 
person is independent of the provider of a pension scheme;
 
 
(b)
specifying terms on which an appointment under this section
10
 
must be made;
 
 
(c)
about the form of a certificate and when it must be given.
 
 
(5)
In this Part “the independent person”, in relation to a proposed
 
 
unilateral change, means the person appointed under subsection (1) (a)
 
 
to review it.
15
117F
Unilateral change notice
 
 
(1)
The provider of a pension scheme to which this Part applies may effect
 
 
a unilateral change under section 117B (1) only after—
 
 
(a)
the provider has sent a unilateral change notice to each of the
 
 
required recipients, and
20
 
(b)
the required notice period has expired.
 
 
(2)
“A unilateral change notice” means a notice that includes such
 
 
information relating to the unilateral change as is specified in general
 
 
rules made by the FCA.
 
 
(3)
General rules made pursuant to subsection (2) must, in the case of a
25
 
unilateral change under section 117B (1) (c) or (d) , require the unilateral
 
 
change notice to—
 
 
(a)
specify the pension scheme (“the receiving scheme”) to which
 
 
it is proposed the pensions pots in question are to be
 
 
transferred,
30
 
(b)
specify, in a case in which there is more than one arrangement
 
 
under the receiving scheme, the arrangement subject to which
 
 
it is proposed the pots be held after the transfer, and
 
 
(c)
where membership of the receiving scheme, or of an
 
 
arrangement specified under paragraph (b), entails being a
35
 
party to a contract with the provider of the receiving scheme,
 
 
set out, or otherwise communicate, the terms of such a contract.
 
 
(4)
“The required recipients” means—
 
 
(a)
the members of the scheme directly affected by the change,
 
 
and
40
 
(b)
such other persons as may be specified in general rules made
 
 
by the FCA.
 

Page 65

 
(5)
A unilateral change notice must be in such form, and be sent by such
 
 
means, as is specified in general rules made by the FCA.
 
 
(6)
In subsection (1) “the required notice period” means such period as
 
 
is specified in general rules made by the FCA.
 
117G
Further duties to make FCA general rules
5
 
(1)
The FCA must make general rules—
 
 
(a)
about the fees that may or may not be charged by providers
 
 
of a pension schemes in relation to unilateral changes effected
 
 
under section 117B (1) ;
 
 
(b)
imposing requirements on the provider of a pension scheme
10
 
who proposes to effect, or effects, a unilateral change under
 
 
section 117B (1) to provide information to the independent
 
 
person;
 
 
(c)
imposing requirements on the provider of a pension scheme
 
 
who proposes to effect, or effects, a unilateral change under
15
 
section 117B (1) , as to the records they must keep and retain
 
 
for the purposes of this Part.
 
 
(2)
The rules made by virtue of subsection (1) must apply in relation to
 
 
pension schemes established before, as well as those established after,
 
 
those rules (or this section) came into force.
20
117H
Treasury regulations
 
 
(1)
The Treasury may by regulations—
 
 
(a)
provide that section 117B (1) does not apply in relation to
 
 
unilateral changes of a description specified in the regulations;
 
 
(b)
amend section 117D (best interests test);
25
 
(c)
prescribe further conditions (in addition to those in sections
 
 
117D to 117F ) that must be met in relation to a unilateral
 
 
change for it to be permitted under section 117B (1) ;
 
 
(d)
require the FCA to make general rules in compliance with
 
 
section 117E (4) (b) that require the inclusion, in the terms of an
30
 
appointment under that section, of a term providing that
 
 
members of the pension scheme may in their own right enforce
 
 
the terms of appointment under section 1 of the Contracts
 
 
(Rights of Third Parties) Act 1999;
 
 
(e)
disapply any legislation, or require the FCA to disapply any
35
 
general rule, so far as it restricts or otherwise affects the power
 
 
in section 117B (1) ;
 
 
(f)
make provision consequential on this Part.
 
 
(2)
The Treasury must by regulations require the FCA to include provision
 
 
of a description specified in the regulations in general rules made in
40
 
compliance with section 117E (4) (a) (how to determine whether a person
 

Page 66

 
is independent), alongside any other provision included in such general
 
 
rules.
 
 
(3)
Regulations under subsection (2) must in particular require the FCA
 
 
to include in such general rules provision designed to ensure that the
 
 
independent person does not have a conflict of interest.
5
 
(4)
The power to make regulations under subsection (1) is capable of
 
 
being exercised so as to amend or repeal any provision of primary
 
 
legislation.
 
117I
Interpretation of Part
 
 
(1)
In this Part—
10
 
“the best interests test” has the meaning given by section 117D (2) ;
 
 
“directly affected” , in relation to a unilateral change, has the
 
 
meaning given by section 117D (3) ;
 
 
“FCA-regulated” , in relation to a pension scheme, has the meaning
 
 
given by subsection (2) ;
15
 
“the independent person” , in relation to a proposed unilateral
 
 
change, has the meaning given by section 117E (5) ;
 
 
“money purchase benefits” means money purchase benefits within
 
 
the meaning of the Pension Schemes Act 1993 (see section 181(1)
 
 
of that Act) or the Pension Schemes (Northern Ireland) Act
20
 
1993 (see section 176(1) of that Act);
 
 
“pension pot” has the meaning given by subsection (3) ;
 
 
“pension scheme” has the meaning given by section 1(5) of the
 
 
Pension Schemes Act 1993 ;
 
 
“personal pension scheme” means a personal pension scheme
25
 
within the meaning of the Pension Schemes Act 1993 (see
 
 
section 1(1) of that Act) or the Pension Schemes (Northern
 
 
Ireland) Act 1993 (see section 1(1) of that Act);
 
 
“provider” —
 
 
(a)
in relation to an FCA-regulated pension scheme, means
30
 
the person referred to in subsection (2) (b) ;
 
 
(b)
in relation to any other pension scheme, means the
 
 
trustees or managers of the scheme;
 
 
“terms” , in relation to a pension scheme, has the meaning given
 
 
by section 117B (6) ;
35
 
“transfer” , in relation to a pension pot, includes a transfer of an
 
 
amount representing its value;
 
 
“trustees or managers” , in relation to a pension scheme, means—
 
 
(a)
in the case of a scheme established under a trust, the
 
 
trustees of the scheme, and
40
 
(b)
in any other case, the persons responsible for the
 
 
management of the scheme;
 
 
“unilateral change” has the meaning given by section 117B (7) ;
 

Page 67

 
“unilateral change notice” has the meaning given by section
 
 
117F (2) .
 
 
(2)
A pension scheme is “FCA-regulated” if the operation of the scheme—
 
 
(a)
is a regulated activity, and
 
 
(b)
is carried on in the United Kingdom by an authorised person.
5
 
(3)
“Pension pot” means sums or assets held for the purpose of providing
 
 
money purchase benefits to or in respect of a member of a pension
 
 
scheme; and—
 
 
(a)
a reference to the pension scheme that holds a pension pot is
 
 
to that pension scheme;
10
 
(b)
a reference to the individual for whom a pension pot is held
 
 
is to that member.”
 
 
(3)
In section 105 (insurance business transfer schemes), in subsection (3), at the
 
 
end insert—
 
 
“Case 6
15
 
Where the scheme is effected under Part 7A (unilateral changes to
 
 
pension schemes).”
 
 
(4)
In section 168 (appointment of persons to carry out investigations in particular
 
 
cases), in subsection (4), after paragraph (i) insert—
 
 
“(iza)
a person has effected, or has purported to effect, a unilateral
20
 
change under subsection (1) of section 117B (unilateral changes
 
 
by providers of pension schemes), but any of the provisions
 
 
mentioned in subsection (3) of that section may have been
 
 
contravened in relation to it;”.
 
 
(5)
In section 429 (Parliamentary control of statutory instruments), in subsection
25
 
(2B), after paragraph (ab) insert—
 
 
“(ac)
provision made under section 117H which amends or repeals
 
 
any provision of primary legislation;”.
 

Chapter 6

 

Guided retirement

30
49
Default pension benefit solutions
 
 
(1)
Subject to section 50 (1) , the trustees or managers of a relevant scheme must—
 
 
(a)
design, and make available to each eligible member of the scheme,
 
 
one or more default pension benefit solutions;
 
 
(b)
at least in such circumstances or at such times or intervals as may be
35
 
prescribed, review the design (and if appropriate the number) of the
 
 
default pension benefit solutions.
 

Page 68

 
(2)
In this Chapter “pension benefit solution”, in relation to a pension scheme,
 
 
means a contractual or other arrangement for making pension payments in
 
 
respect of members’ accrued rights.
 
 
(3)
In this Chapter “default pension benefit solution”, in relation to a relevant
 
 
scheme, means a pension benefit solution which—
5
 
(a)
is designed for delivering money purchase benefits under the scheme
 
 
to—
 
 
(i)
the eligible members of the scheme generally, or
 
 
(ii)
a subset of those eligible members,
 
 
(b)
is designed to provide a regular income for the eligible members
10
 
concerned in their retirement (whether or not together with other
 
 
benefits),
 
 
(c)
is for the time being designated by the trustees or managers of the
 
 
scheme as the pension benefit solution under which—
 
 
(i)
the eligible members of the scheme generally, or
15
 
(ii)
a subset of those eligible members,
 
 
will receive pension payments unless they choose to receive pension
 
 
payments under a different pension benefit solution, and
 
 
(d)
meets any other conditions that may be prescribed.
 
 
(4)
The trustees or managers of a relevant scheme must, in determining what
20
 
default pension benefit solutions the scheme should make available (generally
 
 
or to subsets of eligible members), take account of—
 
 
(a)
the needs and interests of—
 
 
(i)
the scheme’s membership as a whole, and
 
 
(ii)
any subset of the scheme’s membership that the trustees or
25
 
managers consider appropriate;
 
 
(b)
the circumstances of different eligible members of the scheme (for
 
 
example the normal pension ages of such members or the value or
 
 
expected value of their money purchase benefits under the scheme);
 
 
(c)
the possibility that a member may already have received some of their
30
 
benefits (for example as a lump sum) before deciding to make use a
 
 
default pension benefit solution;
 
 
(d)
such other factors as may be prescribed.
 
 
(5)
Regulations may make provision about how trustees or managers of a scheme
 
 
are to assess the needs and interests of the scheme’s membership for the
35
 
purposes of subsection (4) (a) .
 
 
(6)
Regulations may—
 
 
(a)
specify descriptions of eligible members in relation to which subsection
 
 
(3) is to have effect with the omission of paragraph (b) of that
 
 
subsection;
40
 
(b)
make provision about the meaning for the purposes of subsection
 
 
(3)(b) of—
 
 
(i)
“designed to provide a regular income”;
 

Page 69

 
(ii)
“retirement”.
 
 
(7)
In this Chapter—
 
 
“eligible member” , in relation to a relevant scheme, means any member
 
 
who is accruing or entitled to benefits falling within paragraph (a) of
 
 
the definition of “money purchase benefits” in section 181(1) of the
5
 
Pension Schemes Act 1993 and is not of a description excepted by
 
 
regulations;
 
 
“relevant scheme” means an occupational pension scheme which—
 
 
(a)
provides benefits falling within paragraph (a) of the definition
 
 
of “money purchase benefits” in section 181(1) of the Pension
10
 
Schemes Act 1993,
 
 
(b)
is a registered pension scheme, and
 
 
(c)
is not of a description excepted by regulations.
 
 
(8)
Regulations under this section—
 
 
(a)
are subject to the negative procedure if they are made under subsection
15
 
(1) (b) or (6) (a)
 
 
(b)
otherwise, are subject to the affirmative procedure.
 
50
Transferable members
 
 
(1)
The trustees or managers of a relevant scheme (“the principal scheme”) are
 
 
not required to comply with section 49 (1) in relation to eligible members of
20
 
the scheme (whether comprising the members of the scheme generally or a
 
 
subset of those members) in relation to whom the first or second condition
 
 
is met; and such members are referred to in this Chapter as “transferable
 
 
members”.
 
 
(2)
The first condition is that the trustees or managers of the principal scheme
25
 
have determined that it is not reasonably practicable for them to design and
 
 
make available to the members concerned default pension benefit solutions.
 
 
(3)
The second condition is that the trustees or managers of the principal scheme
 
 
have determined that a qualifying pension benefit solution of a qualifying
 
 
scheme (other than the principal scheme) will provide a better outcome for
30
 
the members concerned than any default pension benefit solution that the
 
 
trustees or managers of the principal scheme could design and make available
 
 
to them.
 
 
(4)
Where the principal scheme has transferable members, the trustees or
 
 
managers must take the steps set out in subsection (5) in respect of them.
35
 
(5)
The steps mentioned in subsection (4) are to—
 
 
(a)
identify a qualifying scheme (the “receiving scheme”) that is able to
 
 
and agrees to—
 
 
(i)
receive a transfer in respect of the accrued rights of the
 
 
transferable member (a “relevant transfer”), and
40

Page 70

 
(ii)
make a qualifying pension benefit solution available to the
 
 
transferable member;
 
 
(b)
at such times or in such circumstances as may be prescribed, enter
 
 
into arrangements (“transfer arrangements”) with the receiving scheme
 
 
with a view to effecting a relevant transfer to that scheme;
5
 
(c)
take any other prescribed steps.
 
 
(6)
In carrying out the step in subsection (5) (a) , the trustees or managers of the
 
 
principal scheme must have regard to the matters mentioned in section 49 (4)
 
 
(and for that purpose references in those paragraphs to “the scheme” are to
 
 
the principal scheme).
10
 
(7)
Section 49 (5) applies for the purposes of subsection (6) as it applies for the
 
 
purposes of section 49 (4) .
 
 
(8)
The trustees or managers of the principal scheme must, at least in such
 
 
circumstances or at such times or intervals as may be prescribed, review the
 
 
suitability of any qualifying pension benefit solution in respect of which they
15
 
have identified a qualifying scheme as mentioned in subsection (5) (a) .
 
 
(9)
In this Chapter, “qualifying pension benefit solution”, in relation to a qualifying
 
 
scheme, means a pension benefit solution designed and maintained by the
 
 
trustees or managers of the scheme that—
 
 
(a)
is designed for delivering money purchase benefits under that scheme
20
 
to—
 
 
(i)
the members of the scheme generally, or
 
 
(ii)
a subset of those members,
 
 
(b)
is designed to provide a regular income for the members concerned
 
 
in their retirement (whether or not together with other benefits), and
25
 
(c)
meets any other conditions that may be prescribed.
 
 
(10)
Nothing in this Chapter authorises any transfer in respect of a person’s accrued
 
 
rights under a relevant scheme without that person’s consent.
 
 
(11)
In this section “qualifying scheme” means—
 
 
(a)
an occupational pension scheme, or
30
 
(b)
a personal pension scheme,
 
 
that is a registered scheme and meets any prescribed conditions.
 
 
(12)
If a transferable member accepts in writing a proposal of the principal scheme
 
 
for the transferable member’s accrued rights to be transferred to the receiving
 
 
scheme—
35
 
(a)
the trustees or managers of the principal scheme must communicate
 
 
that proposal to the receiving scheme, and
 
 
(b)
the proposal is to be treated as requiring the receiving scheme to enrol
 
 
the transferable member as a member of the receiving scheme and
 
 
use the cash equivalent to provide rights for the member under that
40
 
scheme.
 

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(13)
Regulations may make provision about the conditions in subsections (2) and
 
 
(3) , including about the basis on which the determinations mentioned in those
 
 
subsections are to be made.
 
 
(14)
​Regulations may require a pension scheme of a prescribed description to
 
 
agree to receive a transfer in respect of the accrued rights of a transferable
5
 
member where—
 
 
(a)
the principal scheme has been unable, having used reasonable
 
 
endeavours, to identify a qualifying scheme that is able and willing
 
 
to do so, and
 
 
(b)
any other prescribed conditions are met.
10
 
(15)
A requirement under subsection (14) may only be imposed on a pension
 
 
scheme that is one or both of the following—
 
 
(a)
a Master Trust scheme within the meaning of the Pension Schemes
 
 
Act 2017;
 
 
(b)
a consolidator scheme within the meaning of Chapter 2 of Part 2
15
 
(consolidation of small dormant pension pots).
 
 
(16)
Regulations may prohibit or limit the charging of fees in respect of transfers
 
 
made under transfer arrangements.
 
 
(17)
Regulations may provide for the manner in which cash equivalents are to be
 
 
calculated and verified.
20
 
(18)
Regulations under subsection (8) , (16) or (17) are subject to the negative
 
 
procedure; and other regulations under this section are subject to the
 
 
affirmative procedure.
 
51
Provision and gathering of information
 
 
(1)
Where only one pension benefit solution is available to the members of a
25
 
relevant scheme, the trustees or managers must ensure that each eligible
 
 
member of the scheme is given at a prescribed time a communication which—
 
 
(a)
describes the pension benefit solution, and
 
 
(b)
sets out the trustees’ or managers’ opinion as to what might be the
 
 
circumstances (in terms of age, pension savings etc) of a person for
30
 
whom the pension benefit solution is suitable.
 
 
(2)
Where more than one pension benefit solution is available to the eligible
 
 
members of a relevant scheme, the trustees or managers must ensure that, at
 
 
a prescribed time, each eligible member of the scheme is given a
 
 
communication which—
35
 
(a)
describes the default pension benefit solution or qualifying pension
 
 
benefit solution that the trustees or managers consider to be the most
 
 
appropriate to the member (“the specified solution”), and
 
 
(b)
sets out the trustees’ or managers’ opinion as to what might be the
 
 
circumstances (in terms of age, pension savings etc) of a person for
40
 
whom the specified solution is suitable.
 

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(3)
Regulations may make provision about how a pension benefit solution is to
 
 
be presented to a member when the member applies to receive benefits.
 
 
(4)
The trustees or managers of a relevant scheme must ensure that each eligible
 
 
member of the scheme is given at prescribed times or intervals—
 
 
(a)
information about basic features of the member’s pension, including
5
 
that it has—
 
 
(i)
an accumulation phase, and
 
 
(ii)
a decumulation phase;
 
 
(b)
general information about the availability to the member of a default
 
 
pension benefit solution or qualifying pension benefit solution and an
10
 
explanation that such a solution is designed to provide a regular
 
 
income during retirement.
 
 
(5)
Regulations may require the trustees or managers of a relevant scheme to
 
 
communicate to each eligible member at prescribed times or intervals—
 
 
(a)
information about the pension benefit solutions available to the eligible
15
 
members;
 
 
(b)
general information about other options that may be available to the
 
 
member for receiving benefits in respect of their contributions;
 
 
(c)
information describing a particular pension benefit solution that the
 
 
trustees or managers consider to be suitable for the eligible member
20
 
in question;
 
 
(d)
where information within paragraph (c) is included in a
 
 
communication, the trustees’ or managers’ opinion as to what might
 
 
be the circumstances (in terms of age, pension savings etc) of a person
 
 
for whom the pension benefit solution is suitable;
25
 
(e)
any general information prescribed for the purpose of assisting eligible
 
 
members in deciding how to receive their pension benefits.
 
 
(6)
Communications made under or by virtue of any of subsections (1) to (5)
 
 
must be in clear and plain language.
 
 
(7)
The trustees or managers of a relevant scheme may request from eligible
30
 
members of the scheme any information the trustees or managers consider
 
 
reasonably necessary for the purpose of—
 
 
(a)
designing or reviewing, or in the case of transferable members
 
 
identifying, pension benefit solutions;
 
 
(b)
determining what pension benefit solution may be appropriate for the
35
 
member, including what rate of decumulation may be appropriate;
 
 
which may for example include information about the member’s financial
 
 
circumstances or plans for retirement.
 
 
(8)
Regulations may require the trustees or managers of relevant schemes to
 
 
request from eligible members any information the trustees or managers
40
 
consider appropriate for the purposes specified in subsection (7) .
 
 
(9)
In exercising their functions under subsection (7) trustees and managers must
 
 
comply with any requirements that may be prescribed.
 

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(10)
Regulations may make provision about the format of any communications
 
 
authorised or required to be made under this section .
 
 
(11)
Before making regulations under this section the Secretary of State must
 
 
consult any persons the Secretary of State thinks appropriate.
 
 
(12)
Regulations under this section are subject to the negative procedure.
5
52
Information etc in connection with selection of benefit solution
 
 
(1)
Regulations may require trustees or managers of a relevant scheme to provide
 
 
or make available to eligible members, at prescribed times or intervals,
 
 
information expressed in clear and plain language which would or may assist
 
 
in—
10
 
(a)
the selection of a pension benefit solution, or
 
 
(b)
decisions that may need to be made with respect to a pension benefit
 
 
solution.
 
 
(2)
Regulations may require that information provided or made available to a
 
 
member by virtue of subsection (1) must, as far as possible, be based on
15
 
information about the member’s circumstances.
 
 
(3)
Regulations may require trustees or managers of a relevant scheme to—
 
 
(a)
monitor the rate of decumulation under pension benefit solutions used
 
 
by members, and
 
 
(b)
inform the member concerned if the trustees or managers consider
20
 
that the rate of decumulation should be reviewed.
 
 
(4)
Regulations under this section are subject to the affirmative procedure.
 
53
Pension benefits strategy
 
 
(1)
The trustees or managers of a relevant scheme must determine, and from
 
 
time to time review and if necessary revise, a strategy (a “pension benefits
25
 
strategy”) for ensuring that the trustees or managers—
 
 
(a)
identify and carry out the steps they need to take for the purpose of
 
 
understanding the requirements of eligible members of the scheme
 
 
with regard to pension benefit solutions;
 
 
(b)
design, or in the case of transferable members identify, pension benefit
30
 
solutions that take account of those needs;
 
 
(c)
communicate effectively with eligible members of the scheme with
 
 
regard to pension benefit solutions and comply with any regulations
 
 
under section 52 .
 
 
(2)
The trustees or managers must publish the strategy and ensure that a copy
35
 
of it is provided on request to—
 
 
(a)
the Pensions Regulator;
 
 
(b)
any member of the scheme.
 
 
(3)
Regulations may—
 

Page 74

 
(a)
specify any objectives, principles or matters the trustees or managers
 
 
must take into account in determining or revising a strategy;
 
 
(b)
make provision about the level of detail required in a pensions benefit
 
 
strategy;
 
 
(c)
authorise the Secretary of State to—
5
 
(i)
determine the format in which a benefits strategy is to be set
 
 
out, or
 
 
(ii)
delegate that function to the Pensions Regulator;
 
 
(d)
make provision as to the period within which a pension benefits
 
 
strategy must be determined;
10
 
(e)
specify the intervals at which the strategy must be reviewed;
 
 
(f)
require the trustees or managers of relevant schemes to—
 
 
(i)
to take account, in determining or revising a strategy, any
 
 
guidance issued by the Pensions Regulator;
 
 
(ii)
provide in the strategy evidence of how they have taken
15
 
account of any matters prescribed by virtue of subsection (3) (a) .
 
 
(4)
Regulations may require the trustees or managers of a relevant scheme to
 
 
publish, alongside a pension benefits strategy (or revised pension benefits
 
 
strategy), prescribed information or evidence as to whether and how they
 
 
have complied with the requirements imposed by virtue of this Chapter.
20
 
(5)
Regulations under this section—
 
 
(a)
are subject to the affirmative procedure if they are under subsection
 
 
(3) (a) ;
 
 
(b)
otherwise are subject to the negative procedure.
 
54
Enforcement and compliance
25
 
(1)
Regulations may make provision with a view to ensuring the compliance of
 
 
any person with any provision of or under this Chapter.
 
 
(2)
The regulations may in particular—
 
 
(a)
provide for the Pensions Regulator to issue a notice (a “compliance
 
 
notice”) to a person with a view to ensuring the person's compliance
30
 
with a provision of or under this Chapter;
 
 
(b)
provide for the Pensions Regulator to issue a notice (a “third party
 
 
compliance notice”) to a person with a view to ensuring another
 
 
person's compliance with a provision of or under this Chapter;
 
 
(c)
provide for the Pensions Regulator to issue a notice (a “penalty notice”)
35
 
imposing a penalty on a person where the person—
 
 
(i)
has failed to comply with a compliance notice or third party
 
 
compliance notice, or
 
 
(ii)
has contravened a provision of or under this Chapter;
 
 
(d)
provide for the making of a reference to the First-tier Tribunal or
40
 
Upper Tribunal in respect of the issue of a penalty notice or the amount
 
 
of a penalty;
 

Page 75

 
(e)
confer other functions on the Regulator.
 
 
(3)
The regulations may make provision for determining the amount, or the
 
 
maximum amount, of a penalty in respect of a failure or contravention.
 
 
(4)
But the amount of a penalty imposed under the regulations in respect of a
 
 
failure or contravention must not exceed—
5
 
(a)
£10,000, in the case of an individual, and
 
 
(b)
£100,000, in any other case.
 
 
(5)
Any penalty payable under the regulations is recoverable by the Regulator.
 
 
(6)
In England and Wales, any such penalty is, if the county court so orders,
 
 
recoverable under section 85 of the County Courts Act 1984 or otherwise as
10
 
if it were payable under an order of that court.
 
 
(7)
In Scotland, a penalty notice is enforceable as if it were an extract registered
 
 
decree arbitral bearing a warrant for execution issued by the sheriff court of
 
 
any sheriffdom.
 
 
(8)
The Regulator must pay into the Consolidated Fund any penalty recovered
15
 
under this section.
 
 
(9)
Section 7 of the Pensions Act 1995 (appointment of trustees) is amended as
 
 
follows.
 
 
(10)
In subsection (3), at the end of paragraph (c) omit “or” at the end of paragraph
 
 
(c) and after that paragraph insert—
20
 
“(ca)
to secure compliance with the duties of trustees under Chapter
 
 
6 of Part 2 of the Pension Schemes Act 2025, or”.
 
 
(11)
Regulations under this section are subject to the affirmative procedure.
 
55
Crown application
 
 
(1)
This Chapter applies to a pension scheme managed by or on behalf of the
25
 
Crown as it applies to other pension schemes.
 
 
(2)
Accordingly, references in this Chapter to a person in their capacity as a
 
 
trustee or manager of a pension scheme include the Crown, or a person acting
 
 
on behalf of the Crown, in that capacity.
 
 
(3)
This Chapter applies to persons employed by or under the Crown as it applies
30
 
to persons employed by a private person.
 
56
Interpretation of Chapter
 
 
In this Chapter—
 
 
“default pension benefit solution” has the meaning given by section 49 (3) ;
 
 
“eligible member” has the meaning given by section 49 (7) ;
35
 
“money purchase benefits” has the same meaning as in the Pension
 
 
Schemes Act 1993 (see section 181 of that Act);
 

Page 76

 
“occupational pension scheme” has the same meaning as in the Pension
 
 
Schemes Act 1993 (see section 1(1) of that Act);
 
 
“pension benefit solution” has the meaning given by section 49 (2) ;
 
 
“pension scheme” has the meaning given by section 1(5) of the Pension
 
 
Schemes Act 1993;
5
 
“personal pension scheme” has the same meaning as in the Pension
 
 
Schemes Act 1993 (see section 1(1) of that Act);
 
 
“prescribed” means prescribed by regulations;
 
 
“principal scheme” is to be interpreted in accordance with section 50 (1) ;
 
 
“qualifying pension benefit solution” has the meaning given by section
10
 
50 (9) ;
 
 
“registered pension scheme” has the meaning given in Part 4 of the
 
 
Finance Act 2004;
 
 
“regulations” means regulations made by the Secretary of State under
 
 
this Chapter;
15
 
“relevant scheme” has the meaning given by section 49 (7) ;
 
 
“transferable member” is to be interpreted in accordance with section
 
 
50 (1) ;
 
 
“trustees or managers” , in relation to a pension scheme, means—
 
 
(a)
where the scheme is established under a trust, the trustees of
20
 
the scheme;
 
 
(b)
in any other case, the managers of the scheme.
 
57
Corresponding provision in relation to FCA-regulated schemes
 
 
In the Financial Services and Markets Act 2000, before section 137FC insert—
 
“137FBD
FCA general rules: guided retirement
25
 
(1)
The FCA must make general rules for the purpose of ensuring that
 
 
default or qualifying pension benefit solutions are made available to
 
 
members of relevant pension schemes.
 
 
(2)
In determining what provision to include in the rules, the FCA—
 
 
(a)
must have regard to provision made by, and any provision
30
 
made under, Chapter 6 of Part 2 of the Pension Schemes Act
 
 
2025 (guided retirement: schemes regulated by the Pensions
 
 
Regulator), and
 
 
(b)
must aim to ensure, so far as possible, that the outcomes
 
 
achieved by the rules in relation to relevant pension schemes
35
 
correspond to those achieved by that Chapter, and any
 
 
regulations made under it, in relation to pension schemes to
 
 
which that Chapter applies.
 
 
(3)
In this section—
 
 
“default or qualifying pension benefit solution” means a pension
40
 
benefit solution which—
 

Page 77

 
(a)
is designed for delivering money purchase benefits
 
 
under a pension scheme to some or all of the members
 
 
of the scheme,
 
 
(b)
is designed to provide a regular income for the members
 
 
concerned in their retirement (whether or not together
5
 
with other benefits), and
 
 
(c)
meets any other prescribed conditions;
 
 
“FCA-regulated pension scheme” means a pension scheme whose
 
 
operation—
 
 
(a)
is a regulated activity, and
10
 
(b)
is carried on in the United Kingdom by an authorised
 
 
person;
 
 
“money purchase benefits” has the same meaning as in the
 
 
Pension Schemes Act 1993 (see section 181 of that Act);
 
 
“pension benefit solution” , in relation to a pension scheme, means
15
 
a contractual or other arrangement for making pension
 
 
payments in respect of members’ accrued rights;
 
 
“pension scheme” has the meaning given in section 1(5) of the
 
 
Pension Schemes Act 1993;
 
 
“relevant pension scheme” means an FCA-regulated pension
20
 
scheme that is—
 
 
(a)
an auto-enrolment scheme,
 
 
(b)
a workplace personal pension scheme that is not an
 
 
auto-enrolment scheme, or
 
 
(c)
a pension scheme of a prescribed description,
25
 
and for that purpose “auto-enrolment scheme” has the meaning
 
 
given in section 117A (3) and “workplace personal pension
 
 
scheme” has the meaning given in section 117A (5) .”
 

Part 3

 

Superfunds

30

Chapter 1

 

Introductory

 
58
Overview
 
 
(1)
This Part—
 
 
(a)
contains a regulatory framework for superfunds, and
35
 
(b)
prohibits superfund transfers except where made in accordance with
 
 
that framework.
 
 
(2)
This Chapter defines key concepts such as “superfund scheme”, “superfund”,
 
 
“superfund transfer” and “capital buffer”.
 

Page 78

 
(3)
Chapter 2 allows for authorisation of superfunds by the Regulator, which is
 
 
an initial step that must be taken before a scheme is eligible to receive
 
 
superfund transfers.
 
 
(4)
Chapter 3 requires the Regulator’s approval for individual superfund transfers
 
 
and sets out the criteria for granting approval.
5
 
(5)
Chapter 4 sets out requirements that superfunds must meet on an ongoing
 
 
basis once they have received a superfund transfer.
 
 
(6)
Chapter 5 contains special procedures which apply if an “event of concern”
 
 
(such as a superfund falling into financial difficulties or breaching regulatory
 
 
requirements) takes place.
10
 
(7)
Chapter 6 makes provision about interpretation of this Part and confers power
 
 
to extend this Part to other similar structures.
 
59
Key concepts
 
 
(1)
“Superfund scheme” means a trust-based occupational pension scheme—
 
 
(a)
that has received a transfer of defined-benefit liabilities from another
15
 
trust-based occupational pension scheme,
 
 
(b)
that is supported by a capital buffer, and
 
 
(c)
that is not supported by a substantive employer covenant,
 
 
or a trust-based occupational pension scheme that is managed or administered
 
 
with a view to its becoming such a scheme.
20
 
(2)
A trust-based occupational pension scheme is “supported by a capital buffer”
 
 
if a contract or other legally binding arrangement has been entered into under
 
 
which assets that are not assets of the scheme—
 
 
(a)
must be held by a person in connection with the scheme, and
 
 
(b)
must, in specified circumstances, be made available to the trustees for
25
 
the purpose of satisfying liabilities of the scheme.
 
 
(3)
“Capital buffer”, in relation to a trust-based occupational pension scheme,
 
 
means assets that are the subject of a contract or other arrangement of the
 
 
kind described in subsection (2) in relation to the scheme.
 
 
(4)
A trust-based occupational pension scheme is “not supported by a substantive
30
 
employer covenant” if, based on the employer’s financial position, there is
 
 
no realistic prospect of the employer being able to provide the trustees with
 
 
material financial support for the purpose of satisfying liabilities of the scheme.
 
 
For that purpose the employer’s “financial position” means its financial
 
 
position ignoring—
35
 
(a)
any capital buffer, and
 
 
(b)
any financial support which it may obtain from another person but
 
 
to which it is not entitled.
 
 
(5)
“Superfund”, in relation to a superfund scheme, means the scheme together
 
 
with—
40

Page 79

 
(a)
any capital buffer, and
 
 
(b)
any arrangements in place for the management and administration of
 
 
the scheme or any capital buffer.
 
 
(6)
“Superfund transfer” means a transfer of defined-benefit liabilities from a
 
 
trust-based occupational pension scheme (whether or not itself a superfund
5
 
scheme) to a superfund scheme.
 
60
Schemes divided into sections
 
 
(1)
This section applies for the purposes of this Part (unless the context otherwise
 
 
requires).
 
 
(2)
Where a trust-based occupational pension scheme includes two or more
10
 
sections—
 
 
(a)
each section is treated as a separate scheme,
 
 
(b)
the members of the scheme that are allocated to each section are treated
 
 
as the members of that separate scheme,
 
 
(c)
the assets and liabilities of the scheme that are allocated to each section
15
 
are treated as the assets and liabilities of that separate scheme, and
 
 
(d)
in the case of a superfund scheme, the assets of the capital buffer that
 
 
are allocated to each section are treated as the capital buffer in relation
 
 
to that separate scheme.
 
 
(3)
Accordingly, in the case of a superfund scheme, any of the following is treated
20
 
as a superfund transfer—
 
 
(a)
the reallocation of members between sections;
 
 
(b)
the combination of two or more sections;
 
 
(c)
the division of one section into two or more.
 
 
(4)
A “section” of a trust-based occupational pension scheme means
25
 
arrangements—
 
 
(a)
which have effect under the rules of the scheme (including, in the case
 
 
of a superfund scheme, the capital buffer arrangement), and
 
 
(b)
under which particular assets of the scheme (and, in the case of a
 
 
superfund scheme, the capital buffer) may only be used to satisfy the
30
 
scheme’s liabilities to or in respect of members of the scheme of a
 
 
particular description,
 
 
and those particular assets, liabilities and members are “allocated” to the
 
 
section in question.
 

Chapter 2

35

Authorisation of superfunds

 
61
Prohibition of unauthorised superfund activity
 
 
(1)
Where a pension scheme is not part of an authorised superfund, a person
 
 
may not—
 

Page 80

 
(a)
promote the scheme (generally or to a particular person) with a view
 
 
to its receiving a superfund transfer,
 
 
(b)
enter into any arrangements on behalf of the scheme with a view to
 
 
its receiving a superfund transfer, or
 
 
(c)
cause or permit such promotion to take place or such arrangements
5
 
to be entered into.
 
 
(2)
Subsection (1) does not apply where the person takes all reasonable steps to
 
 
ensure—
 
 
(a)
in relation to promotion of a scheme, that it is clear from the promotion
 
 
that the scheme is not part of an authorised superfund;
10
 
(b)
in relation to arrangements entered into, that it is clear to every party
 
 
to the arrangements, as at the time when the arrangements are entered
 
 
into, that the scheme is not part of an authorised superfund.
 
 
(3)
A person who breaches subsection (1) commits an offence.
 
 
(4)
A person who commits an offence under subsection (3) is liable—
15
 
(a)
on summary conviction in England and Wales, to a fine;
 
 
(b)
on summary conviction in Scotland, to a fine not exceeding the
 
 
statutory maximum;
 
 
(c)
on conviction on indictment, to imprisonment for a term not exceeding
 
 
two years or a fine or both.
20
 
(5)
Section 88A of the Pensions Act 2004 (financial penalties) applies to a person
 
 
who breaches subsection (1) (but see subsection (10) of that section, which
 
 
prevents a penalty from being imposed in respect of an act where the person
 
 
has been convicted of an offence in respect of the same act, or where
 
 
proceedings for such an offence are ongoing).
25
62
Authorisation of superfunds
 
 
(1)
The Regulator may authorise a superfund if satisfied, based on the superfund’s
 
 
organisation, staff, plans, policies and procedures, that it is likely to comply
 
 
with the requirements of Chapters 4 and 5 (ongoing requirements for
 
 
superfunds).
30
 
(2)
An application for authorisation must be made jointly by—
 
 
(a)
the trustees of the superfund scheme, and
 
 
(b)
a body corporate that is incorporated in the United Kingdom and that
 
 
is involved in the scheme’s management or administration.
 
 
(3)
An application for authorisation must be made in the manner and form
35
 
specified by the Regulator.
 
 
(4)
The Secretary of State may by regulations make provision about applications
 
 
for authorisation, including provision—
 
 
(a)
about the documents and information that an application must include;
 
 
(b)
requiring a fee to be paid to the Regulator in respect of an application.
40

Page 81

 
(5)
The Regulator must maintain and publish a list of authorised superfunds.
 
 
(6)
Where a superfund has not yet received a superfund transfer, the Regulator
 
 
may withdraw the superfund’s authorisation if no longer satisfied as described
 
 
in subsection (1) .
 
 
(7)
Regulations under subsection (4) are subject to the negative procedure.
5
63
Timing of decisions about authorisation
 
 
(1)
The Regulator must decide an application under this Part before the end of
 
 
the period of 6 months beginning with the day on which it received the
 
 
application (“the decision period”).
 
 
(2)
If in a particular case the Regulator considers that the decision period is
10
 
insufficient to enable it to decide the application, it may on one or more
 
 
occasions extend that period by notice to the applicants; but it may not extend
 
 
it beyond the end of the period of 9 months beginning with the day on which
 
 
it received the application.
 
 
(3)
Where an application received by the Regulator fails to comply with section
15
 
62 or regulations made under it (including where the applicants fail to pay
 
 
a fee required in respect of the application) the references in subsections (1)
 
 
and (2) to the day on which the Regulator receives the application are to the
 
 
day on which the failure is remedied.
 

Chapter 3

20

Approval of superfund transfers

 
64
Prohibition of unapproved superfund transfers
 
 
(1)
A person may not make or receive a superfund transfer, or cause or permit
 
 
a superfund transfer to be made or received, unless the superfund transfer
 
 
is approved under this Chapter .
25
 
(2)
A person who breaches subsection (1) commits an offence.
 
 
(3)
A person who commits an offence under subsection (2) is liable—
 
 
(a)
on summary conviction in England and Wales, to a fine;
 
 
(b)
on summary conviction in Scotland, to a fine not exceeding the
 
 
statutory maximum;
30
 
(c)
on conviction on indictment, to imprisonment for a term not exceeding
 
 
2 years or a fine or both.
 
 
(4)
Section 88A of the Pensions Act 2004 (financial penalties) applies to a person
 
 
who breaches subsection (1) (but see subsection (10) of that section, which
 
 
prevents a penalty from being imposed in respect of an act where the person
35
 
has been convicted of an offence in respect of the same act, or where
 
 
proceedings for such an offence are ongoing).
 

Page 82

65
Approval of superfund transfers
 
 
(1)
The Regulator may approve a superfund transfer if—
 
 
(a)
the receiving superfund is authorised,
 
 
(b)
the ceding scheme does not have any active members, and
 
 
(c)
the Regulator is satisfied, based on evidence provided by the trustees
5
 
of the ceding scheme and by the responsible body of the receiving
 
 
superfund, that each of the onboarding conditions is met in relation
 
 
to the transfer.
 
 
(2)
For the purposes of this Part , “the onboarding conditions” in relation to a
 
 
superfund transfer are—
10
 
(a)
that, as at the date of the application, the financial position of the
 
 
ceding scheme is not strong enough to enable the trustees to arrange
 
 
an insurer buyout;
 
 
(b)
that the superfund transfer will make it more likely that the transferred
 
 
liabilities will be satisfied in full;
15
 
(c)
that it is reasonable to expect that the capital adequacy threshold will
 
 
be met in relation to the receiving superfund immediately following
 
 
the superfund transfer;
 
 
(d)
that it is reasonable to expect that the technical provisions threshold
 
 
will be met in relation to the receiving superfund at the end of the
20
 
period specified in regulations made by the Secretary of State;
 
 
(e)
that the receiving superfund is likely to comply with the requirements
 
 
of Chapters 4 and 5 (ongoing requirements of superfunds) after the
 
 
superfund transfer takes place.
 
 
(3)
Approval under this section may be given subject to conditions, including as
25
 
to—
 
 
(a)
the superfund transfer being made on terms of a specified description;
 
 
(b)
the superfund transfer being made within a period of a specified
 
 
description;
 
 
(c)
any of the onboarding conditions continuing to be met for a period
30
 
of a specified description after approval is given but before the
 
 
superfund transfer is made.
 
 
(4)
The Secretary of State may by regulations amend this section for the purpose
 
 
of substituting another condition relating to the financial position of the ceding
 
 
scheme for the onboarding condition for the time being in subsection (2) (a) .
35
 
(5)
The Secretary of State may by regulations make provision about the
 
 
onboarding conditions, including provision about—
 
 
(a)
the information and evidence that the trustees of the ceding scheme
 
 
and the responsible body of the receiving superfund must provide for
 
 
the purpose of satisfying the Regulator that an onboarding condition
40
 
is met;
 
 
(b)
how the Regulator is to assess whether an onboarding condition is
 
 
met;
 

Page 83

 
(c)
the conditions that may or must be imposed under subsection (3) .
 
 
(6)
The Secretary of State may by regulations modify subsection (2) in its
 
 
application to a superfund transfer of a kind described in section 60 (3) (merger
 
 
of sections etc).
 
 
(7)
In relation to a superfund transfer—
5
 
“the ceding scheme” means the scheme from which the transferred
 
 
liabilities are transferred (or intended to be transferred);
 
 
“the receiving superfund” means the superfund that includes the
 
 
superfund scheme to which the transferred liabilities are transferred
 
 
(or intended to be transferred);
10
 
“the transferred liabilities” means the liabilities that are transferred (or
 
 
intended to be transferred).
 
 
(8)
In subsection (1) , “active members” has the same meaning as in Part 1 of the
 
 
Pensions Act 1995 (see section 124 of that Act).
 
 
(9)
Regulations under subsection (2) (d) are subject to the negative procedure.
15
 
(10)
Regulations under subsection (4) or (5) are subject to the affirmative procedure.
 
 
(11)
Regulations under subsection (6) are subject to the negative procedure.
 
 
(12)
See also section 66 (which makes special provision in relation to schemes that
 
 
are being wound up in particular circumstances).
 
66
Special provision for certain schemes coming out of assessment period
20
 
Where in relation to a superfund transfer the ceding scheme is required to
 
 
be wound up, or its winding up is required to continue, under section 154(1)
 
 
of the Pensions Act 2004 (pension protection: requirement to wind up schemes
 
 
with sufficient assets to meet protected liabilities), section 65 (2) has effect as
 
 
though—
25
 
(a)
paragraph (a) were omitted, and
 
 
(b)
for paragraph (b) there were substituted—
 
 
“(b)
that the superfund transfer—
 
 
(i)
will increase the proportion of the transferred
 
 
liabilities likely to be satisfied, and
30
 
(ii)
will not lead to any member of the ceding
 
 
scheme being worse off than they would be if
 
 
the superfund transfer were not made;”.
 
67
Applications for approval
 
 
(1)
An application for approval under section 65 must be made jointly by—
35
 
(a)
the trustees of the ceding scheme, and
 
 
(b)
the responsible body of the receiving superfund.
 

Page 84

 
(2)
The application must be made in the manner and form specified by the
 
 
Regulator.
 
 
(3)
The Regulator must decide whether or not to approve a superfund transfer,
 
 
and must notify the applicants of its decision, as soon as reasonably practicable
 
 
after receiving the application.
5
 
(4)
The Secretary of State may by regulations make provision about applications
 
 
for approval, including about the documents and information that must be
 
 
included in an application.
 
 
(5)
Regulations under subsection (4) are subject to the negative procedure.
 

Chapter 4

10

Ongoing requirements of operating superfunds

 

Governance and organisation

 
68
Governance and structure
 
 
(1)
The responsible body of an operating superfund must ensure, so far as
 
 
reasonably practicable, that the superfund has policies and procedures in
15
 
place—
 
 
(a)
that allow for the superfund to be managed and administered
 
 
effectively in the interests of members of the superfund scheme,
 
 
(b)
that ensure the superfund’s compliance with the requirements of this
 
 
Part and any other legislation relating to pensions, and
20
 
(c)
that are proportionate to the scale and nature of the superfund’s
 
 
activities.
 
 
(2)
Those policies and procedures must, in particular, address the following
 
 
matters—
 
 
(a)
how the responsible body, the other members of the superfund group,
25
 
and the trustees of the superfund scheme are to interact with each
 
 
other, and how any conflicts are to be resolved;
 
 
(b)
how investment decisions are to be taken in relation to the capital
 
 
buffer and the superfund scheme;
 
 
(c)
the implications of receiving new superfund transfers;
30
 
(d)
the management of risks.
 
 
(3)
The responsible body of an operating superfund must ensure that the
 
 
superfund meets any conditions specified in regulations made by the Secretary
 
 
of State as to—
 
 
(a)
the corporate form, jurisdiction of incorporation or jurisdiction of tax
35
 
residence of a member of the superfund group;
 
 
(b)
the structure of the superfund group;
 

Page 85

 
(c)
the terms of the capital buffer arrangement (including as to how, by
 
 
whom, in what jurisdiction and on what terms the capital buffer may
 
 
be held);
 
 
(d)
compliance with tax legislation.
 
 
(4)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
5
 
body if it breaches subsection (1) or (3) .
 
 
(5)
The Secretary of State may by regulations amend this section for the purpose
 
 
of adding, removing or varying a matter which the policies and procedures
 
 
mentioned in subsection (1) must address.
 
 
(6)
Regulations under subsection (3) or (5) are subject to the affirmative procedure.
10
69
Management documents
 
 
(1)
The responsible body of an operating superfund must ensure that each of the
 
 
management documents—
 
 
(a)
is prepared in relation to the superfund,
 
 
(b)
complies with any requirements as to form or content specified in
15
 
regulations made by the Secretary of State, and
 
 
(c)
is kept under review and revised if appropriate.
 
 
(2)
The responsible body of an operating superfund must ensure, so far as
 
 
reasonably practicable, that the superfund is managed and administered in
 
 
accordance with the management documents.
20
 
(3)
“The management documents” means—
 
 
(a)
a business plan;
 
 
(b)
a governance manual;
 
 
(c)
a continuity strategy;
 
 
(d)
a fees and expenses policy.
25
 
(4)
In subsection (3) —
 
 
“continuity strategy” means a strategy for protecting the interests of
 
 
members of the superfund scheme if an event of concern occurs;
 
 
“fees and expenses policy” means a document setting out how fees and
 
 
expenses incurred by the superfund will be funded;
30
 
“governance manual” means a document setting out how and by whom
 
 
the superfund is managed and administered.
 
 
(5)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it breaches subsection (1) or (2) .
 
 
(6)
The Secretary of State may by regulations amend this section for the purpose
35
 
of adding, removing or varying a management document in subsection (3) .
 
 
(7)
Regulations under subsection (1) (b) are subject to the negative procedure.
 
 
(8)
Regulations under subsection (6) are subject to the affirmative procedure.
 

Page 86

Funding and investment

 
70
Duty to monitor financial thresholds
 
 
(1)
The responsible body of an operating superfund must ensure that the
 
 
superfund has adequate policies and procedures in place for monitoring
 
 
whether each financial threshold is met.
5
 
(2)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it breaches subsection (1) .
 
 
(3)
See also Chapter 5 (events of concern) for the consequences of a financial
 
 
threshold ceasing to be met.
 
71
“Financial thresholds”
10
 
(1)
“The financial thresholds” means—
 
 
(a)
the capital adequacy threshold,
 
 
(b)
the technical provisions threshold,
 
 
(c)
the protected liabilities threshold, and
 
 
(d)
the scheme solvency threshold.
15
 
(2)
“The capital adequacy threshold” is met in relation to a superfund if the total
 
 
value of the assets of the scheme and the capital buffer is such that there is
 
 
a very high likelihood that the liabilities of the scheme to and in respect of
 
 
its members will be satisfied in full.
 
 
(3)
“The technical provisions threshold” is met in relation to a superfund if the
20
 
total value of the assets of the scheme and the capital buffer is greater than
 
 
or equal to the scheme’s technical provisions.
 
 
(4)
“The protected liabilities threshold” is met in relation to a superfund if the
 
 
total value of the assets of the scheme and the capital buffer exceeds the
 
 
amount of the scheme’s protected liabilities by a percentage specified in
25
 
regulations made by the Secretary of State.
 
 
(5)
“The scheme solvency threshold” is met in relation to a superfund on a given
 
 
day if there is no material likelihood that the scheme will fail to satisfy all
 
 
the liabilities to and in respect of members that it is required to satisfy during
 
 
the 6 months beginning with that day.
30
 
(6)
In this section —
 
 
“protected liabilities” has the same meaning as in Chapter 3 of Part 2 of
 
 
the Pensions Act 2004 (see section 131 of that Act);
 
 
“technical provisions” has the same meaning as in section 222 of the
 
 
Pensions Act 2004 (and a superfund scheme’s technical provisions are
35
 
to be calculated for the purposes of this section in the same way as
 
 
its technical provisions would be calculated for the purposes of that
 
 
section).
 

Page 87

 
(7)
The Secretary of State may by regulations make provision about how to
 
 
determine whether any of the financial thresholds is met, including about—
 
 
(a)
how and by whom the value of the assets, liabilities or protected
 
 
liabilities of the scheme, or the value of the capital buffer, is to be
 
 
determined;
5
 
(b)
how and by whom the likelihood of something happening is to be
 
 
assessed;
 
 
(c)
what constitutes a “very high” or “material” likelihood (including
 
 
provision defining those expressions by reference to particular
 
 
percentages or particular criteria).
10
 
(8)
Regulations under subsection (7) may confer a discretion.
 
 
(9)
Regulations under subsection (4) or (7) are subject to the affirmative procedure.
 
72
Capital buffer: compulsory release to trustees
 
 
(1)
A person that is a party to the capital buffer arrangement in relation to an
 
 
operating superfund must ensure, so far as it is in their power to do so, that
15
 
the capital buffer arrangement requires the release of the capital buffer to the
 
 
trustees of the superfund scheme if and to the extent that the release is
 
 
required by—
 
 
(a)
an approved response plan (see sections 87 and 88 ), or
 
 
(b)
a direction of the Regulator under section 89 (direction-making powers
20
 
following event of concern).
 
 
(2)
The capital buffer is “released” to the extent that it is transferred or made
 
 
available to any person otherwise than—
 
 
(a)
in the ordinary course of the investment of the capital buffer, or
 
 
(b)
in payment of fees, expenses, taxes or other charges incurred (in each
25
 
case) in connection with the management or administration of the
 
 
capital buffer.
 
 
(3)
Section 88A of the Pensions Act 2004 (civil penalties) applies to the person if
 
 
they breach subsection (1) .
 
73
Capital buffer: permitted release to other persons
30
 
(1)
A person that is a party to the capital buffer arrangement in relation to an
 
 
operating superfund must ensure, so far as it is in their power to do so, that
 
 
the capital buffer arrangement does not permit the release of the capital buffer
 
 
to a person other than the trustees of the superfund scheme except in
 
 
accordance with subsection (2) or (3) .
35
 
(2)
The capital buffer arrangement may permit the release of the whole capital
 
 
buffer if—
 
 
(a)
the superfund scheme has satisfied all of its liabilities to and in respect
 
 
of its members, or
 
 
(b)
an insurer buyout has taken effect in relation to the superfund scheme.
40

Page 88

 
(3)
The capital buffer arrangement may permit the release of an amount of the
 
 
capital buffer to the extent that the release is a permitted profit extraction.
 
 
(4)
“Permitted profit extraction”, in relation to a superfund, means a release of
 
 
the capital buffer—
 
 
(a)
that takes place at a time when the capital adequacy threshold is
5
 
exceeded to an extent, and has been exceeded for a period of time,
 
 
specified in regulations made by the Secretary of State,
 
 
(b)
that is made to a person of a description specified in the regulations,
 
 
and
 
 
(c)
in relation to which any other requirements specified in the regulations
10
 
are met (which may include a requirement for the Regulator’s consent),
 
 
and for the purposes of paragraph (a) the capital adequacy threshold is
 
 
“exceeded” if and to the extent that the total value of the assets of the scheme
 
 
and the capital buffer is greater than the amount required in order for that
 
 
threshold to be met.
15
 
(5)
A person commits an offence if they cause or permit the capital buffer to be
 
 
released (to any extent)—
 
 
(a)
to a person other than the trustees of the superfund scheme, and
 
 
(b)
otherwise than in accordance with the capital buffer arrangement.
 
 
(6)
A person guilty of an offence under subsection (5) is liable—
20
 
(a)
on summary conviction in England and Wales, to a fine;
 
 
(b)
on summary conviction in Scotland, to a fine not exceeding the
 
 
statutory maximum;
 
 
(c)
on conviction on indictment, to imprisonment for a term not exceeding
 
 
seven years or a fine or both.
25
 
(7)
Section 88A of the Pensions Act 2004 (civil penalties) applies to a person who
 
 
causes or permits the capital buffer to be released (to any extent)—
 
 
(a)
to a person other than the trustees of the superfund scheme, and
 
 
(b)
otherwise than in accordance with the capital buffer arrangement
 
 
(but see subsection (10) of that section, which prevents a penalty from being
30
 
imposed in respect of an act where the person has been convicted of an offence
 
 
in respect of the same act, or where proceedings for such an offence are
 
 
ongoing).
 
 
(8)
Section 10 of the Pensions Act 1995 (civil penalties) applies to a person who
 
 
breaches subsection (1) .
35
 
(9)
Regulations under subsection (4) are subject to the affirmative procedure.
 
74
Capital buffer: investment
 
 
(1)
The responsible body of an operating superfund must ensure that this section
 
 
is complied with.
 

Page 89

 
(2)
The capital buffer must be invested in accordance with a strategy prepared
 
 
by or under the supervision of the responsible body (“the capital buffer
 
 
investment strategy”).
 
 
(3)
The capital buffer investment strategy must comply with any requirements
 
 
specified in regulations made by the Secretary of State.
5
 
(4)
The requirements that may be specified by virtue of subsection (3) include
 
 
requirements as to—
 
 
(a)
the principles to be followed, and the matters to be taken into account,
 
 
in investing the capital buffer;
 
 
(b)
the form and content of the capital buffer investment strategy.
10
 
(5)
The capital buffer investment strategy may not be materially altered except
 
 
with the agreement of the trustees of the superfund scheme.
 
 
(6)
The Secretary of State may by regulations make provision about what counts
 
 
as a “material” alteration for the purposes of subsection (5).
 
 
(7)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
15
 
body if it breaches subsection (1) .
 
 
(8)
Regulations under subsection (3) are subject to the affirmative procedure.
 
 
(9)
Regulations under subsection (6) are subject to the negative procedure.
 
75
Capital buffer: verification of valuations
 
 
(1)
The responsible body of an operating superfund must appoint a person to
20
 
be responsible for verifying valuations of the capital buffer that are carried
 
 
out by or on behalf of the responsible body.
 
 
(2)
The responsible body must ensure that the person appointed verifies such a
 
 
valuation at least once in every period of 12 months.
 
 
(3)
The responsible body must also ensure that the person appointed verifies
25
 
such a valuation—
 
 
(a)
if asked to do so by the trustees of the superfund scheme, and
 
 
(b)
where otherwise required by virtue of this Part.
 
 
(4)
The person appointed—
 
 
(a)
must not be employed by, or involved in the management or
30
 
administration of, a member of the superfund group, and
 
 
(b)
must be a person who, in the reasonable opinion of the responsible
 
 
body, has the appropriate qualifications and experience.
 
 
(5)
A person may not be appointed without the consent of the trustees of the
 
 
superfund scheme.
35
 
(6)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it breaches this section.
 

Page 90

Approval and certification of key personnel

 
76
Key functions
 
 
(1)
The responsible body of an operating superfund must ensure that there is at
 
 
all times at least one individual responsible for each key function.
 
 
(2)
Each of the following activities is a “key function” in relation to a superfund—
5
 
(a)
taking management decisions;
 
 
(b)
taking financial decisions;
 
 
(c)
taking investment decisions;
 
 
(d)
risk management;
 
 
(e)
internal audit;
10
 
(f)
marketing and promotion.
 
 
(3)
An activity is not a key function so far as it relates only to the superfund
 
 
scheme and not to any other part of the superfund.
 
 
(4)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it breaches this section.
15
 
(5)
The Secretary of State may by regulations amend this section for the purpose
 
 
of adding, removing or varying a key function in subsection (2) .
 
 
(6)
Regulations under subsection (5) are subject to the affirmative procedure.
 
77
Approval of individuals responsible for key functions
 
 
(1)
An individual may not be responsible for a key function in relation to an
20
 
operating superfund unless they are approved by the Regulator to be
 
 
responsible for that key function in relation to the superfund.
 
 
(2)
The Regulator may approve an individual only if satisfied that they are a fit
 
 
and proper person to be responsible for that key function in relation to the
 
 
superfund.
25
 
(3)
In deciding whether it is so satisfied the Regulator must take into account,
 
 
in particular, any matters specified in regulations made by the Secretary of
 
 
State.
 
 
(4)
The Regulator may not approve an individual to be responsible for risk
 
 
management if the individual is already responsible for taking investment
30
 
decisions, and vice versa.
 
 
(5)
An application for approval must be made in the manner and form specified
 
 
by the Regulator.
 
 
(6)
Approval may be given for a specified period or subject to specified conditions
 
 
(in which case the person is only approved to be responsible for the key
35
 
function in question for that period or while those conditions are met).
 

Page 91

 
(7)
Approval may be given in advance of the superfund being authorised or
 
 
becoming an operating superfund.
 
 
(8)
If no longer satisfied as described in subsection (2) in relation to an individual,
 
 
the Regulator may by notice to the responsible body—
 
 
(a)
suspend its approval in relation to the individual for a period specified
5
 
in the notice, or
 
 
(b)
revoke its approval in relation to the individual with effect from a
 
 
date specified in the notice.
 
 
(9)
Subsection (1) does not apply to an individual while—
 
 
(a)
they are responsible for a key function on a temporary basis, and
10
 
(b)
the Regulator agrees, in light of the particular circumstances of the
 
 
case, to the person’s being responsible for the key function on that
 
 
basis without approval.
 
 
(10)
If an individual is responsible for a key function in relation to an operating
 
 
superfund in breach of subsection (1) , section 10 of the Pensions Act 1995
15
 
(civil penalties) applies to—
 
 
(a)
the individual, and
 
 
(b)
the responsible body.
 
 
(11)
Regulations under subsection (3) are subject to the negative procedure.
 
78
Certification of staff supporting individuals responsible for key functions
20
 
(1)
The responsible body of an operating superfund must ensure, so far as
 
 
reasonably practicable, that no individual carries out a key function in relation
 
 
to the superfund unless the responsible body—
 
 
(a)
is satisfied, having conducted due diligence in relation to the
 
 
individual, that the individual is a fit and proper person to carry out
25
 
the key function, and
 
 
(b)
has issued a certificate to the individual confirming that it is so
 
 
satisfied.
 
 
(2)
The responsible body must keep a register of certificates issued under
 
 
subsection (1) .
30
 
(3)
In deciding whether it is satisfied as described in subsection (1)(a), the
 
 
responsible body must take into account, in particular, any matters specified
 
 
in regulations made by the Secretary of State.
 
 
(4)
The Secretary of State may by regulations make provision about certificates
 
 
issued under subsection (1) , including about the period of time for which a
35
 
certificate is valid.
 
 
(5)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it breaches subsection (1) .
 
 
(6)
Regulations under subsection (3) or (4) are subject to the negative procedure.
 

Page 92

79
Approval of superfund scheme trustees
 
 
(1)
A person may not be a trustee of an operating superfund scheme unless they
 
 
are approved by the Regulator to be a trustee of the scheme.
 
 
(2)
The Regulator may approve a person to be a trustee of a superfund scheme
 
 
only if satisfied they are a fit and proper person to be a trustee of the scheme.
5
 
(3)
In assessing whether a person is a fit and proper person, the Regulator must
 
 
take into account, in particular, any matters specified in regulations made by
 
 
the Secretary of State.
 
 
(4)
The Regulator may not approve a person to be a trustee of a superfund
 
 
scheme if the person is employed by, or involved in the management or
10
 
administration of, a member of the superfund group.
 
 
(5)
An application for approval must be made in the manner and form specified
 
 
by the Regulator.
 
 
(6)
Approval may be given for a specified period or subject to specified conditions
 
 
(in which case the person is approved to be a trustee only for that period or
15
 
only while those conditions are met).
 
 
(7)
Approval may be given in advance of the superfund being authorised or
 
 
becoming an operating superfund.
 
 
(8)
If no longer satisfied as described in subsection (2) in relation to a person,
 
 
the Regulator may by notice to the person—
20
 
(a)
suspend its approval in relation to the person for a period specified
 
 
in the notice, or
 
 
(b)
revoke its approval in relation to the person with effect from a date
 
 
specified in the notice.
 
 
(9)
Subsection (1) does not apply to a person while—
25
 
(a)
they serve as a trustee of a superfund scheme on a temporary basis,
 
 
and
 
 
(b)
the Regulator agrees, in light of the particular circumstances of the
 
 
case, to their being a trustee on that basis without approval.
 
 
(10)
If a person becomes a trustee of an operating superfund scheme in breach of
30
 
subsection (1) , section 10 of the Pensions Act 1995 applies to—
 
 
(a)
the person, and
 
 
(b)
the person who appointed them.
 
 
(11)
Regulations under subsection (3) are subject to the negative procedure.
 

Information and reporting

35
80
Events to be notified to the Regulator
 
 
(1)
The responsible body of an operating superfund must notify the Regulator
 
 
of any of the following—
 

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(a)
a material deterioration in the investment performance of the capital
 
 
buffer;
 
 
(b)
a material change to any of the management documents;
 
 
(c)
a material change to the capital buffer arrangement;
 
 
(d)
a release of any of the capital buffer by way of permitted profit
5
 
extraction;
 
 
(e)
the bringing of proceedings against, or the launching of an
 
 
investigation by a public body into, a member of the superfund group;
 
 
(f)
a breach of any requirement of this Chapter.
 
 
(2)
The trustees of an operating superfund scheme must notify the Regulator of
10
 
any of the following—
 
 
(a)
a material deterioration in the investment performance of the scheme;
 
 
(b)
a material change to the rules of the scheme;
 
 
(c)
the bringing of proceedings against, or the launching of an
 
 
investigation by a public body into, the trustees.
15
 
(3)
A notification under this section must be made—
 
 
(a)
where the person responsible for the notification is aware in advance
 
 
that the event in question is to take place, as soon as reasonably
 
 
practicable after it becomes so aware;
 
 
(b)
otherwise, as soon as reasonably practicable after the event takes place.
20
 
(4)
A notification under this section must be made in the manner and form
 
 
specified by the Regulator.
 
 
(5)
Section 10 of the Pensions Act 1995 (civil penalties) applies to a person who
 
 
breaches this section.
 
 
(6)
The Secretary of State may by regulations make provision (including provision
25
 
amending this section)—
 
 
(a)
for the purpose of adding, removing or varying a matter to be notified
 
 
under subsection (1) or (2) ;
 
 
(b)
about what counts as “material” for the purposes of any paragraph
 
 
of subsection (1) or (2) .
30
 
(7)
Regulations under subsection (6) are subject to the affirmative procedure.
 
81
Regular reporting
 
 
(1)
The trustees of an operating superfund scheme must provide the Regulator
 
 
with regular reports about the financial position of the superfund.
 
 
(2)
The reports must comply with any requirements specified in regulations made
35
 
by the Secretary of State, which may in particular include requirements as
 
 
to—
 
 
(a)
the form and content of reports;
 
 
(b)
the times at which, and intervals at which, reports are to be provided.
 

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(3)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the trustees if
 
 
they breach this section.
 
 
(4)
Regulations under subsection (2) are subject to the negative procedure.
 
82
Returns
 
 
(1)
The Regulator may, by notice to the responsible body of an operating
5
 
superfund, require the responsible body to submit a return to the Regulator
 
 
for the purpose of enabling the Regulator to monitor—
 
 
(a)
the financial position of the superfund, or
 
 
(b)
the superfund’s compliance with the requirements of this Chapter.
 
 
(2)
The notice must specify—
10
 
(a)
the period within which the return must be submitted, and
 
 
(b)
the information (or description of information) which the return must
 
 
contain.
 
 
(3)
The Regulator may not require the responsible body to submit a return more
 
 
than once in any period of 12 months.
15
 
(4)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it fails to submit a return in accordance with a notice under this
 
 
section.
 
83
Reports in relation to alleged compliance breaches
 
 
(1)
If the Regulator considers or suspects that a requirement of this Chapter has
20
 
been breached in relation to an operating superfund, it may give the
 
 
responsible body notice of its intention to appoint a person to prepare a report
 
 
about the issue to which the alleged breach relates.
 
 
(2)
Where such notice is given, the responsible body—
 
 
(a)
must provide the person appointed with whatever assistance the
25
 
person reasonably requires, and
 
 
(b)
must meet the Regulator’s reasonable costs in respect of the report.
 
 
(3)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it fails to comply with subsection (2) .
 
84
Provision of information by responsible body to trustees
30
 
(1)
The responsible body of an operating superfund must provide the trustees
 
 
of the superfund scheme with whatever information relating to the superfund
 
 
the trustees may reasonably request to enable the trustees to comply with
 
 
any legislation relating to pensions that applies to them in respect of the
 
 
superfund scheme.
35
 
(2)
Section 10 of the Pensions Act 1995 (civil penalties) applies to the responsible
 
 
body if it fails to comply with subsection (1) .
 

Page 95

Chapter 5

 

Events of concern

 
85
“Event of concern” and “period of concern”
 
 
(1)
An “event of concern” takes place in relation to a superfund if any of the
 
 
following takes place—
5
 
(a)
any one of the financial thresholds ceases to be met (subject to
 
 
subsection (4) );
 
 
(b)
a debt falls due to the trustees of the superfund scheme under section
 
 
75 of the Pensions Act 1995 ;
 
 
(c)
the capital buffer is released otherwise than in accordance with the
10
 
capital buffer arrangement;
 
 
(d)
an insolvency event becomes, in the opinion of the directors of the
 
 
responsible body, likely to occur in relation to the responsible body;
 
 
(e)
an insolvency event occurs in relation to a member of the superfund
 
 
group;
15
 
(f)
the responsible body notifies the Regulator that it wishes to cease to
 
 
be the responsible body;
 
 
(g)
a material transaction takes place;
 
 
(h)
a superfund transfer is made to the superfund scheme without
 
 
approval under Chapter 3 ;
20
 
(i)
an application is made under Chapter 3 for approval of a superfund
 
 
transfer in relation to which the ceding scheme is itself a superfund
 
 
scheme;
 
 
(j)
an application is made under Chapter 3 for approval of a superfund
 
 
transfer of a kind described in section 60 (3) (merger of sections etc);
25
 
(k)
the responsible body or the trustees of the superfund scheme receive
 
 
a notice from the Regulator stating that, in the Regulator’s opinion,
 
 
the recipient of the notice—
 
 
(i)
has breached a requirement of this Part or of any other
 
 
legislation relating to pensions that applies to them in respect
30
 
of the superfund, or
 
 
(ii)
is likely to breach such a requirement if remedial action is not
 
 
taken;
 
 
(l)
the Regulator withdraws the superfund’s authorisation under section
 
 
93 .
35
 
(2)
“Period of concern”, in relation to an event of concern, means the period
 
 
beginning when the event takes place and ending—
 
 
(a)
when the Regulator gives the responsible body a notice under section
 
 
87 (5) (event of concern resolved) in respect of the event, or
 
 
(b)
when the superfund scheme is wound up.
40
 
(3)
In subsection (1) (g) “material transaction” means—
 

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(a)
a change in the person or persons who have control of the responsible
 
 
body, or
 
 
(b)
a sale by a member of the superfund group of all or substantially all
 
 
of its assets.
 
 
(4)
The Secretary of State may by regulations provide that an event of concern
5
 
within subsection (1)(a) does not take place—
 
 
(a)
unless the Regulator is satisfied that the financial threshold in question
 
 
is not met, or
 
 
(b)
unless the threshold is not met for a period, or in circumstances,
 
 
specified in the regulations (and for that purpose the period or
10
 
circumstances specified may involve the exercise of a discretion by
 
 
the Regulator).
 
 
(5)
The Secretary of State may by regulations amend this section for the purpose
 
 
of adding, removing or varying—
 
 
(a)
an event of concern in subsection (1) ;
15
 
(b)
a material transaction in subsection (3) .
 
 
(6)
In this section —
 
 
“control” has the same meaning as in section 435 of the Insolvency Act
 
 
1986;
 
 
“director” includes any person occupying the position of director, by
20
 
whatever name called;
 
 
“insolvency event” has the same meaning as in Part 2 of the Pensions
 
 
Act 2004 (see section 121 of that Act).