UK Pensions: What’s new this week? June 23, 2025

TPR: Defined Contribution (DC) schemes should prepare now for the Pension Schemes Bill

The Pensions Regulator (TPR) has published a speech setting out steps that DC schemes should be taking now, in preparation for upcoming changes under the Pension Schemes Bill:

• Focus on value and saver outcomes: in particular, obtaining and using appropriate data and insights to review investment strategies. TPR and the Financial Conduct Authority (FCA) will launch a voluntary, annual, market-wide survey of asset allocation in major DC schemes later this year, in advance of the value for money framework set out in the bill providing data for comparison.
• Increase scale: trustees should consider whether their scheme is sustainable in the long term and if it genuinely provides value. If another arrangement would offer better value, they should start considering consolidation. Schemes that are at scale should consider different investment opportunities.
• Improve data: beyond auditing member data for accuracy and completeness, schemes should consider investing in digital infrastructure to support automation and reporting.
• Innovate: in particular, TPR wants schemes to develop and engage with new products in response to the Guided Retirement duty included in the bill (which will require DC schemes to provide a default decumulation option). On the theme of innovation, TPR also published a blog post on its recent "policy hackathon"—the first event of its newly launched Innovation Support Service.

Read the speech and read the "hackathon" blog post.

HMRC changes policy on VAT on DB investment management costs

HMRC has announced a policy change in relation to VAT deduction on costs relating to the management of assets held in DB occupational pension schemes.

Since 2014, following the CJEU’s ruling in PPG Holdings, HMRC’s position has been that employers could recover VAT in relation to investment management services provided to DB schemes, where the employer both commissions the service and pays the cost directly. Arrangements to enable VAT deduction in these circumstances include VAT grouping and the pension scheme trustees supplying administration services to an employer. However, within the context of those arrangements, where there was dual use of investment costs by both the employer and the scheme trustees, HMRC required a method of apportionment on a fair and reasonable basis to determine how much input tax could be deducted by each party.

From June 18, 2025, HMRC no longer views investment costs as being subject to dual use. Instead, all the associated input tax incurred will be seen as the employer’s and deductible by the employer, subject to normal deduction rules. In addition, where trustees are supplying pension fund management services to the employer and charging for them, they will also be able to deduct input tax incurred for the purpose of providing those services, provided they are VAT-registered. Any deductions by the trustees will be subject to normal deduction rules and any claims for additional input tax will be subject to the normal four-year cap.

Businesses may need to propose new partial exemption special methods (PESMs) to align their VAT recovery with the new policy. Any new PESMs approved by HMRC will take effect from the start of the tax year in which the PESM was submitted.

The policy statement says that HMRC will publish guidance to explain the policy change by autumn 2025. Depending on current arrangements and pending the further guidance, schemes and employers may want to review their VAT position.

Read the policy paper.

TPO pensions dishonesty unit (PDU) to wind down

The Pensions Ombudsman (TPO) has confirmed that its PDU pilot will end in October 2025 "due to broader government funding constraints". The PDU, launched in 2021, was set up to investigate and address serious cases of breaches of trust, misappropriation of pension funds and dishonest or fraudulent behaviour. TPO will ensure that customers receive signposting to appropriate alternative reporting avenues, such as TPR and Action Fraud, and to potential sources of alternative redress.

Read the announcement.