UK pensions group opposes key government reform plans
The UK’s main pensions trade association has submitted responses to three government consultations, raising objections to proposed adjustments in defined contribution plans, levy costs, and surplus release policies. The Department for Work and Pensions’ proposals—addressing consolidation targets, funding adjustments, and regulatory fees—will alter how pension providers function, prompting Pensions UK to challenge key aspects of the reforms.
The government’s consolidation push for defined contribution schemes has already sparked practical concerns. A £25 billion minimum size requirement for “main scale default arrangements” intends to reduce the number of pension schemes but creates operational uncertainty. Some consultants are already excluding master trusts below this threshold from selection processes, even though compliance is not required until 2035. This premature filtering could disadvantage smaller providers despite their potential for growth.
Pensions UK argues the rules may hinder rather than support innovation. The trade body wants clearer transition pathways to help schemes reach the target without penalizing smaller providers. “Regulation should allow schemes to develop solutions that reflect how people plan to use their savings in retirement, rather than incentivising fewer choices simply to meet a threshold,” said Zoe Alexander, director of policy and advocacy at Pensions UK. “Uncertainty is already affecting which schemes are considered during provider selection, regardless of their performance, governance or potential to grow.”
Levy hikes threaten smaller pension schemes
Criticism has also focused on proposed levy increases set for 2027. The general levy, which funds oversight bodies like the Pensions Regulator, has seen income more than double, from $43.5 million in 2018-19 to £98.4 million in 2025-26. Pensions UK warns the planned hikes do not account for market changes, including the expansion of master trusts and automatic enrollment. The trade body has called for a full review of cost allocation, warning that higher fees could disproportionately affect members with small pension pots.
Master trusts face the steepest levy increases under the per-member charging method. These schemes often serve members with modest savings, meaning higher regulatory costs could undermine the government’s consolidation goals. Pensions UK highlighted past successes, such as lobbying for the abolition of the administration levy paid to the Pension Protection Fund, as proof that targeted advocacy can influence policy. The trade body now seeks similar adjustments to prevent disproportionate burdens on smaller providers.
Surplus release rules face cautious industry support
The surplus release consultation received broader support from Pensions UK, with more than two-thirds of its members backing the government’s plans to give defined benefit trustees greater flexibility. The draft rules aim to balance safeguards with the ability to distribute excess funds. However, the trade body stressed that the low dependency funding threshold should not trigger automatic surplus payments. “These regulations should give schemes a clear and workable framework, not a one-size-fits-all process,” said Zoe Alexander, director of policy and advocacy at Pensions UK.
Timeframes and advice requirements also need refinement, according to the trade body. Current drafts favor one-off surplus payments over phased releases, which could limit flexibility for well-funded schemes. Pensions UK urged the government to preserve trustee discretion and allow proportionate advice, arguing that surplus decisions should reflect individual scheme circumstances rather than rigid rules.
These responses mark the first phase of Pensions UK’s broader effort to prepare the industry for 2030 reforms. With the Value for Money framework consultation approaching its deadline, the trade body’s lobbying will continue to shape how these changes unfold, particularly as the government balances consolidation goals with the need to protect savers and smaller providers.
Pensions UK’s Stance on Surplus Release and Levy Framework Reforms
The trade association has expressed concerns over proposed rules for releasing surplus from defined benefit pension funds. It argues that surplus should not be treated as automatically available for distribution. Instead, the framework must prioritize member security and allow trustees to assess long-term funding, employer commitments, and emerging risks. The association emphasizes that regulations should provide flexibility rather than a rigid, one-size-fits-all approach.
