Navigating the changing landscape of pension schemes in 2025
The pensions industry is experiencing a period of transformation with regulatory changes, technological innovations and strategic shifts reshaping how employers and trustees approach retirement planning.
The funding and financial landscape
The past year has been marked by changes in pension scheme funding following key announcements at the tail end of 2024.
The Purple Book, which highlights trends in defined benefit (DB) scheme funding, was published in December with the data indicating improved funding positions, a fall in section 179 and buyout liabilities and movement into safer asset allocations. The improved outlook resulted in a decrease in the PPF levy for employers with DB obligations, reflecting a reduction in the risks the PPF faces with reserves at their highest-ever level and lower projected future claims. Similarly, The Pensions Regulator’s annual funding statement also noted positive funding levels and a strong funding position, allowing most schemes to shift their focus from deficit recovery to endgame planning.
The new DB funding code came into force in November, affecting trustees of DB schemes with actuarial valuation dates on or after 22 September 2024. The new code primarily focuses on encouraging long-term planning, risk management and ensuring schemes are adequately funded over time, particularly as they mature.
The increase in national insurance contributions, as announced in the Autumn Budget was a significant change for employers, which saw costs for businesses rise considerably. One way employers can reduce these additional costs is via the implementation of salary sacrifice for pension contributions. Salary sacrifice is a tax efficient way for both employers and employees to pay into a workplace pension. It provides a national insurance saving for both employers and employees while also encouraging employees to think about saving for retirement.
Regulatory compliance: new governance paradigms
The General Code came into force in March 2024 and consolidated 10 of The Pensions Regulator’s 15 codes of practice into a single code for trust-based pension schemes. To ensure compliance, trustees should carry out a gap analysis to review the existing policies and procedures they have in place, establish an effective system of governance and undertake an own risk assessment (if required).
Meanwhile employers who provide their employees with a DC pension arrangement are encouraged to periodically carry out a review of their pension provider to assess whether they are still fit for purpose and will provide good retirement outcomes for their employees. This follows a recent DWP survey which suggested that 82% of employers providing DC pensions had never switched or considered switching pension providers. A DC provider review will compare elements such as member charges, investment performance, retirement options, communications with members and the online capabilities of the providers.
Perhaps the biggest changes will be revealed in the upcoming Pension Schemes Bill. The Bill, which has been introduced to the House of Commons ahead of the summer recess, aims to streamline the pensions system, with a focus on surplus release for DB schemes and small pot consolidation for DC schemes.
Technological and innovative revolutions
Pensions dashboards will allow individuals to view information about their pensions, including their State Pension, in one place online. This will put savers in control and help reconnect them with their lost pension pots, transforming how people think and plan for their retirement.
The first pension scheme connected to the dashboard in April and all pension schemes with over 100 members will need to connect by 31 October 2026 at the latest. The dashboard availability point, the point at which dashboards will go live to the public, is still unknown but the government has previously confirmed that they will provide at least six months’ notice.
Another big development in the pensions industry is the introduction of collective defined contribution (CDC) schemes. A CDC scheme is a type of occupational pension scheme that combines aspects of both DB and DC schemes, offering members a target pension at retirement and guaranteed income for life while also providing employers with cost certainty and the ability to pool contributions. Royal Mail launched the first UK CDC scheme in 2024 for its employees and The Pensions Trust is in the process of putting in place their own multi-employer CDC scheme.
Employers, trustees and pension providers must remain agile, informed and forward-thinking. Embracing technological innovations, understanding new regulatory requirements, and adopting strategic approaches to pension management will be crucial in navigating this evolving landscape.
Sarah Garnish, Consultant
02 July 2025