Horizon scanning

FCA/DWP - Pensions Dashboard 

The Pensions Act gives the power to the Secretary of State, MAPS or a party appointed by the Secretary of State to create the regulations for Dashboard.  

The Pensions Dashboards Regulations 2022, as amended by the Pensions Dashboards (Amendment) Regulations 2023, introduced a single “connection deadline” of 31 October 2026 for pension schemes to connect to the dashboard ecosystem. The Department for Work and Pensions (DWP) published a revised staged timetable for connection in guidance with the first connections date in April 2025.

You can read more here in the Pension Dashboard Programme's tenth progress update.

HMRC - Increasing the normal minimum pension age  

The normal minimum pension age is increasing for most individuals on 6 April 2028 to age 57. This change affects people born after 6 April 1971. 

The government originally announced their intention to increase the normal minimum pension age from age 55 to 57 from April 2028 back in July 2014. The legislation required to make the change was included in the Finance Act 2022. 

Some individuals have a protected pension age in their pension scheme, which is the right to take benefits before age 57. Individuals don’t need to register this right with HMRC. 

Between 2026 and 2028, the State Pension age is changing to 67. Originally it was proposed the minimum pension age would be linked to State Pension ages, so it was always 10 years earlier, but this was not included in the Finance Act 2022.

Increase in normal minimum pension age in 2028

Consultation on a policy framework to support individuals use their pension savings in decumulation

This is a follow up consultation to the DWP’s earlier Call for Evidence titled ‘Helping savers understand their choices’.  The DWP want to place a duty on trustees to offer decumulation services which are suitable for their scheme members and consistent with the pension freedoms.

• They want schemes to provide a solution or solutions that deliver what scheme members want to achieve from their later life income.
• They want schemes to guide their scheme members towards products and services based on their response to simple questions.
• They want to understand the practical considerations involved with partnering arrangements to provide these solutions.
• They want to establish whether a centralised scheme is needed to deliver decumulation options where trustees don’t offer them directly.
• They want to know what the government can do to encourage a decumulation Collective Defined Contribution (CDC) market to emerge.

Helping savers understand their pension choices

Ending the proliferation of small pots

This is the government response to the call for evidence “addressing the challenge of deferred small pots”.  It proposes a multiple consolidator model as a solution utilising either a clearing house or central registry to match pots and communicate with scheme members. There would be a new authorisation regime to be a consolidator. It proposes this rather than the other option being considered, such as pension follows member.

It also signals a further consultation on “stapling” where an individual's active pension pot is assigned as their pot for life unless they actively choose an alternative provider as a potential next step to reduce the “flow” of small pots.

The DWP has said that they intend to progress with the consolidator model. The working groups output will inform what is required by the Pension Scheme Bill. There has also been a mini consultation on whether to allow member only consolidation (where firms would only have to take pots where they already have a pot for a member).

Pensions (Extension of Automatic Enrolment) Act 2023

Pensions (Extension of Automatic Enrolment) (no 2) Bill completed its journey through Parliament and was granted Royal Assent.

The Pensions (Extension of Automatic Enrolment) Act 2023 creates powers to reduce the age for being automatically enrolled (to age 18) and enable pension saving from the first pound earned.

So, what’s next? The Department for Work and Pensions (DWP) will launch a consultation on implementing the new measures. Watch this space.

FCA’s Outcome on Thematic Review of Retirement Income Advice

The Financial Conduct Authority (FCA) has written to the Chief Executives of financial advice firms asking them to review their processes when providing retirement income advice after the FCA’s Thematic Review of Retirement Income Advice (TR24/1).

The aim of the review: 

• To gain detailed insights into how the retirement income advice market is functioning.
• Understand whether firms’ advice models consider the specific needs of consumers in decumulation.
• Consider whether consumers are being provided with suitable retirement income advice when accessing benefits built up through pension savings, and take appropriate action to tackle any harms identified.
• Inform FCA’s future areas of focus.

They have also published a Retirement Income Advice Assessment Tool (RIAAT) with instructions and an article on Cashflow modelling (CFM), in connection with the outcome of review.

FCA consultation (CP24/16): The Value for Money Framework ​

​The FCA are consulting on detailed rules and guidance for a new VFM framework for savers invested in default arrangements of workplace DC pension schemes.​ The proposals will:

• Require consistent measurement and public disclosure of investment performance, costs, and service quality by firms for all such arrangements against metrics that will allow VFM to be assessed effectively.​
• Enable those overseeing and challenging an arrangement’s value – IGCs and GAA for contract-based schemes – to assess performance against other arrangements on a consistent and objective basis.​
• Require public disclosure of assessment outcomes including a 'red, amber, green' (RAG) VFM rating for each arrangement.​
• Require firms to take specified actions where an arrangement has been assessed as not VFM (red or amber).​

[GAA means Governance Advisory Arrangement]

​The consultation notes that the VFM metrics for Longstanding workplace arrangements should be compared with that of active schemes when considering RAG ratings.​

​The consultation closed on 17 October.

​The FCA has not set an implementation timeline. They will do this based on the consultation feedback, and in consultation with the DWP, who will use this information to inform the Pensions Bill (required to set comparable rules for Trust based schemes).​

CP24/16: The Value for Money Framework

Inheritance Tax on pensions: liability, reporting and payment

In the Autumn Budget, the government announced that unused pension funds and death benefits payable from a pension will form part of a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027. As part of this change, the government proposes that pension scheme administrators will become liable for reporting and paying any IHT due on unused pension funds and death benefits.

A technical consultation was issued seeking views on the processes and information reporting requirements required to implement this change.

The consultation focused on 2 main areas:

Reporting

Pension Scheme Administrators (PSAs): PSAs will be responsible for reporting the value of unused pension funds and death benefits to HM Revenue & Customs (HMRC).

Information Exchange: There will be a structured process for exchanging information between PSAs, personal representatives (PRs) of the deceased’s estate, beneficiaries, and HMRC.

Payment

PSAs’ Responsibility: PSAs will also be liable for paying any IHT due on these pension assets.

Tax Deduction at Source: For beneficiaries, the IHT will be deducted at source, meaning they will receive the inherited pension with the tax already taken off.

Annex B of the consultation also summarises which death benefits will be included.

The technical consultation closed on 22 January 2025. HMRC are now reviewing the issues and views expressed in the responses and will publish both a formal response and draft legislation later in the year.

Inheritance tax on pension death benefits from April 2027

Reducing tax-free overseas transfers of tax relieved UK pensions

In a bid to prevent UK residents from benefiting from double tax-free allowances, in the Autumn Budget, the Government announced changes to the tax treatment of overseas pension transfers. They have also published draft legislation.

The proposals

• Overseas Transfer Charge (OTC): The government removed the exclusion from the OTC for transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) established in the European Economic Area (EEA) and Gibraltar. This means that such transfers will now be subject to a 25% tax charge unless specific conditions are met.
• Alignment of Conditions: From 6 April 2025, the conditions for Overseas Pension Schemes (OPS) and Recognised Overseas Pension Schemes (ROPS) established in the EEA will be aligned with those established in the rest of the world. This includes requirements for regulation by a local pension regulator and the existence of a double taxation agreement with the UK.
• Scheme Administrators: Starting 6 April 2026, all scheme administrators of registered pension schemes must be UK residents.

Extended yield drawdown tables for use from 1 September 2025

HMRC published extended drawdown pension tables on 27 March 2025.  The extended tables apply from 1 September 2025. The extended tables should be used for all calculations done on or after that date.