Catalyst: DC pensions
DC PENSIONS TECHNICAL UPDATE | SUMMER EDITION
At a glance
- The Government has published its updated roadmap for workplace pension reform, providing greater clarity on the sequencing and expected timing of reforms enabled by the Pension Schemes Act 2026.
- The Department for Work & Pensions (DWP) and Financial Conduct Authority (FCA) have launched another consultation on the VfM Framework, a cornerstone of the Government's DC reform programme.
- The Pensions Commission has published its interim report on the state of retirement saving in the UK.
- The Pensions Regulator (TPR) has launched a multi-year communications programme aimed at helping schemes prepare for the Pension Schemes Act reforms.
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TPR have also published its AI Plan, which aims to clarify its expectations on how trustee and scheme managers should govern the use of AI within their workplace pension schemes.
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The DWP has consulted on changes to the Conditions for Transfers Regulations, which were initially passed in 2021 to provide greater protection to pension savers from scams when transferring pension benefits.
- Pensions UK have updated their Retirement Living Standards, following a review in March 2026.
- The Office for Budget Responsibility noted that the state pension age was expected to increase to 68 between 2037 and 2039, earlier than the legislated timeframe of between 2044 and 2046.
- Torsten Bell has been reappointed as Pensions Minister under the Government of new Prime Minister Andy Burnham.
UK DC pensions reform agenda accelerates: key developments
The UK defined contribution (DC) pensions landscape took a further step forward in July 2026, with the Government and regulators publishing a series of important documents that progress policy with the intent to lead towards greater consolidation, improved member outcomes and higher governance standards.
Government releases updated workplace pensions roadmap
The Government published its updated roadmap for workplace pension reform, providing greater clarity on the sequencing and expected timing of reforms enabled by the Pension Schemes Act 2026. The roadmap covers developments across DC and collective defined contribution (CDC) provision, with a separate plan covering developments in defined benefit (DB) pensions.
The roadmap is designed to help schemes, providers and advisers prepare for a multi-year programme of change, and we have noted some of the key changes and timings below:
- Scale thresholds for multi-employer DC schemes will be introduced in April 2030 with applications for the transition pathways to be made from 2029.
- The new Value for Money (VfM) Framework will have a phased implementation timeline throughout 2028/29.
- The Contractual Override mechanism, which will allow bulk transfers without consent from underperforming contract-based arrangements is due to be implemented from Spring 2028.
- The timeline for trustees to implement guided retirement solutions has been pushed back to 2029 and potentially beyond to 2030 for those committed to pursuing Retirement CDC as the default solution.
- Automatic consolidation of small, deferred DC pots is expected to start from April 2030, although this timeline is dependent on the final decisions on the delivery approach.
All reforms are subject to further preparatory work, including consultations on draft regulations, additional guidance and formation of industry delivery groups, and the Government has outlined estimated sequencing for these in the roadmap document.
July 2026 VfM Framework consultation
Alongside this roadmap, the Department for Work & Pensions (DWP) and Financial Conduct Authority (FCA) have launched another consultation on the VfM Framework, a cornerstone of the Government's DC reform programme. Under the proposed framework, pension arrangements will be assessed against a range of standardised metrics covering investment performance, costs and charges, and quality of service. A central database and standardised disclosures are intended to improve transparency and make comparisons across schemes easier for employers, advisers and members.
The consultation includes draft regulations and FCA rules, and proposes a number of changes to those previously suggested, including:
- A suggested phased implementation approach. In 2028, Master Trusts, large single-employer schemes (defined as those with over 50,000 members) and contract-based arrangements would undertake full VfM assessments. Other schemes will initially provide data only, before all in-scope schemes will be required to undertake full assessments in 2029.
- To ensure there is sufficient lead-in time after the framework comes into effect, it is proposed that data collection in 2028 covers only July 2027 to December 2027 rather than the full 2027 calendar year.
- Formal regulatory consequences for poor performance (e.g. amber or red VfM ratings) are proposed not to apply until the 2029 assessment cycle, giving schemes time to adapt.
- Data submitted in March would only be made publicly available in November, once VfM assessments for the year have been completed. Parties undertaking assessments would have access to the data in the interim period.
- A number of technical changes to the basis on which schemes are required to report certain data items to ensure accurate and fair comparisons can be made.
The consultation closes on 1 September 2026, with final rules and regulations expected early in 2027.
DWP discussion paper on the Scale Policy
The DWP has also published a discussion paper seeking industry views on key aspects of its Scale Policy. This policy forms part of the Government's ambition to create a market with fewer, larger pension schemes capable of delivering better value and investing more effectively for savers.
The Pension Schemes Act 2026 introduced provisions requiring in-scope multi-employer DC schemes to meet minimum scale thresholds from 2030. Current proposals would require schemes to have at least £25 billion of assets within a main scale default arrangement, although some schemes with at least £10 billion may be able to operate under transitional arrangements if they have a credible growth plan.
The discussion paper focuses on the practicalities of three key design questions: the definition of a Main Scale Default Arrangement, the operation of a Common Investment Strategy and the extent to which connected schemes within a provider group can be treated collectively when assessing scale requirements. The Government is seeking evidence and stakeholder views by 7 September 2026 before consulting on draft regulations during 2027.
DWP policy paper on default pensions
The Government has published a policy paper setting out its guiding principles for default pensions and the outcomes they are intended to deliver. The principles will help shape the framework for the forthcoming Guided Retirement regulations, which will place duties on trustees, as well as FCA rules on default strategies for workplace pensions which fall under their regulation. The key principles are as follows:
- Members must not be required to make complex decisions or have specialist knowledge to achieve good retirement outcomes.
- Default pensions must provide a sustainable retirement income that protects against longevity risk and lasts through a member’s retirement.
- Members retain freedom of choice, so can choose other options if they wish.
- Members must consent at the point of access to receiving their default pension, at which point communication will be critical including detail of other options available and, if applicable, any phases of the default retirement strategy (e.g. flex then fix).
Pensions Commission interim report
In May 2026, the Pensions Commission published its interim report on the state of retirement saving in the UK. The Pensions Commission was revived in July 2025 and tasked with considering the long-term future of the UK pensions system, with a particular focus on adequacy and retirement outcomes, as many people are either not saving or saving too little for retirement despite the success of automatic enrolment.
The interim report focused on identifying the key challenges faced by the UK pension system and areas that will be of particular focus include:
- Britain is significantly undersaving for retirement. Around 15 million people are currently not saving enough for retirement, and projections suggest this could rise to 19 million in the future.
- 45% of working-age adults (approximately 18 million people) are not contributing to a pension at all, even though nearly half of these are in employment.
- Low and middle earners are at the greatest risk of undersaving for retirement. About half the people in this bracket only save the minimum required through automatic enrolment and have little additional provision.
- Self-employed workers are particularly at risk, with only 4% of the wholly self-employed saving at all for retirement. Participation is even lower among younger self-employed workers.
- There are concerns for certain groups who are more likely to face inadequate retirement outcomes, including women, carers, ethnic minority groups, gig economy works and disabled workers.
- 30% of private pension pots are accessed at the earliest possible age, half of which are fully withdrawn and often spent on large purchases.
The interim report clearly sets out the significant challenges and gaps within the current system and concludes that without any changes, many future pensioners are on track for lower retirement incomes and could become increasingly reliant on state support.
The Pensions Commission is expected to publish its final report in early 2027, which will make policy recommendations to the Government on how to improve future retirement outcomes while ensuring the retirement savings ecosystem is sustainable and maintains intergenerational fairness.
Additional research into pension saving and adequacy
With the Pensions Commission report bringing concerns around adequacy into the spotlight, other industry bodies have published research to add to the evidence base around these issues. Pensions UK published “Closing the gaps: Can flexible contributions make retirement savings more affordable?” in June 2026, focusing on those in low-income households who are expected to be under significant financial pressure and may be unable to make higher contributions.
Options for potential automatic enrolment flexibilities were highlighted while taking into account affordability and the realities of changing work patterns. Flexible contribution options which could be considered included:
- Introducing auto-escalation to support both adequacy and affordability using a phased approach.
- Introducing tiered contributions rates which rise with income.
- Allowing members to opt down to a lower percentage than automatic enrolment minimums, with corresponding employer contribution, as an alternative to opting out altogether.
- Promoting an employer only contribution structure with no corresponding employee contribution.
- Removing the Lower Earnings Limit so contributions are paid from the first pound of earnings.
- Considering sidecar savings, channelling any pension contributions over the statutory minimum into a savings vehicle for emergency spend.
In conclusion, the report noted there was support for a rise to total 12% minimum contributions on a matched basis, but recognised the need to both maintain automated, regular and predictable deductions for employees and to manage increased costs for employers.
A publication by the Pensions Policy Institute (PPI) in May 2026, as part of a series of research papers, examined policy options which could improve retirement income adequacy for low earners. The paper concluded that no single policy approach would benefit all profiles of low earners and that any change in policy would require identification of those who would face increased risks of poor retirement outcomes as a result.
Also in May 2026, the DWP issued a research report exploring how labour market histories (including patterns of employment and employment status) and life events (such as having children and changes in relationship or housing status) are associated with pension saving in the UK, and the resulting differences in retirement outcomes later in life.
TPR urges DC trustees to prepare for higher standards
On 25 June 2026, The Pensions Regulator (TPR) published a blog entitled "DC trustees: time to get ready for higher standards", launching a multi-year communications programme aimed at helping schemes prepare for the Pension Schemes Act reforms. TPR's message was clear: trustees cannot afford to wait until regulations are finalised before taking action.
The first stage of the engagement programme was an email issued to trustees, asking them to consider their scheme’s ability to comply with the new reforms and whether members would benefit from consolidation into a scheme that can provide better value for money and higher standards of governance.
Alongside this, a Pension Schemes Act 2026 website has been created to bring together all updates relating to the reforms in a single place.
The blog highlighted several important duties, including VfM assessments, the introduction of default guided retirement solutions, facilitation of small-pot consolidation and compliance with future scale requirements (the latest updates concerning these is covered further in ‘Headline updates’).
These developments demonstrate that the UK pensions reform programme has now entered its delivery phase. Trustees, advisers and providers will need to engage actively with consultations, review governance frameworks and prepare for a more transparent, outcome-focused pensions market over the coming years.
Consultation on Conditions for Transfers Regulations
The DWP has consulted on changes to the Conditions for Transfers Regulations, which were initially passed in 2021 to provide greater protection to pension savers from scams when transferring pension benefits. These regulations placed obligations on trustees in relation to the due diligence they undertook when considering a transfer request and introduced a number of amber and red flags, which would require enhanced due diligence, signposting to MoneyHelper guidance or refusal of the transfer altogether.
A Government review in 2023 found that there had been unintended consequences from these regulations, including the introduction of unnecessary friction following identification of an ‘amber flag’ relating to overseas investments within the receiving scheme. The wording of the initial regulations was not precise enough to allow trustees to progress transfers to reputable schemes with overseas investments, which are a common occurrence. The proposed changes aim to tighten up the regulations so they more precisely target genuine risks without weakening safeguards, and include:
- Giving trustees the power to allow transfers to proceed without further checks where they are satisfied that the transfer is to a ‘reputable’ pension scheme.
- Removing the overseas investment ‘amber flag’.
- Introducing a new ‘red flag’ where an employment link cannot be demonstrated with a receiving arrangement that is an occupational pension scheme.
- Exempting members from taking MoneyHelper guidance more than once in a 12-month period.
This consultation closed in July 2026 and forms part of a programme of work in relation to pension scams and transfers, which will explore wider considerations including modernisation of the pension transfer process and enabling members to make well informed decisions while maintaining robust protections.
Quick updates
- TPR published its AI Plan in May 2026, which aims to clarify its expectations on how trustee and scheme managers should govern the use of AI within their workplace pension schemes. TPR clarifies that responsibility for outcomes achieved through the use of AI remain with trustees and scheme managers, even where activities are delegated, and that it intends to issue detailed guidance on this matter later in the year.
- In the meantime, TPR expects trustees and scheme managers to establish clear governance practices for AI use, rigorously test and monitor AI systems, ensure AI risks are integrated into risk management processes, be aware of AI-supported scam activities and seek professional advice where appropriate.
- In July 2026, the Pensions Regulator published its new Corporate Strategy, which sets a clear direction for the next five years and is centred on a vision that "people have a sustainable income in retirement, supported by a pensions system that provides security and value for all". TPR intends to achieve this vision by delivering impact on raising governance standards, driving value for money and improving sustainable outcomes in retirement.
Pensions UK Retirement Living Standards updates
On 3 June 2026, Pensions UK, updated their Retirement Living Standards, following a review in March 2026.
These are widely used to help people understand what type of lifestyle they can expect in retirement and consider household bills, transport and social activities and hobbies.
The updated figures set out below assume living outside of London. It is important to note that these do not allow for mortgages and rents or personal costs like social care or looking after pets.
| Retirement Living Standard | One person household – required income (after tax) a year | Estimated additional DC pension pot assuming full State Pension for one person |
| Minimum | £13,900 | £23K - £34K |
| Moderate | £32,700 | £335K - £505K |
| Comfortable | £45,400 | £560K - £845K |
Source: Pensions UK
More information and details including London rates can be found here.
For those on the “Minimum” level, the State Pension could be expected to make up the majority of retirement income. The full State Pension is £12,548 p.a. (2026/27), however many individuals will not receive the full amount, especially those who are part time workers or who take extended career breaks.
For many there is a clear shortfall between actual and expected retirement income. With pensions adequacy a hot topic, it is crucial to help educate individuals and manage their expectations. This also creates additional pressure on employers to help meet pension savings gaps by contributing more and encouraging employees to review their contributions regularly to ensure they’re on track for the retirement they want and expect.
Impact of proposed earlier adoption of state pension age increases
In its latest report, the Office for Budget Responsibility noted that the state pension age was expected to increase to 68 between 2037 and 2039, earlier than the legislated timeframe of between 2044 and 2046, which could impact those born between 1971 and 1977.
We have done calculations to show how much more people approaching retirement may need to save if they still want to retire at 67 despite receiving their State Pension a year later, showing that a 55-year-old on median UK earnings (£38,000) who wants to retire at 67 would need to save around an extra £74 a month (2.3% of salary) until retirement to bridge the one-year gap before becoming eligible for the State Pension. This equates to 2.3% of salary for someone earning £38,000 compared to only 1.1% for someone earning £80,000.
Once pension tax relief is taken into account, the impact on take-home pay falls to around £53 a month (1.7% of salary) for the median earner using salary sacrifice, compared with £43 a month (0.6% of salary) for an £80,000 earner.
The Pensions Minister has denied in a series of posts on social media that the current Government is planning to bring forward the state pension age as described and claims this was referring to the policy position of the previous Conservative Government.
Pensions Dashboard updates
Earlier this year, the Pensions Dashboards Programme (PDP) issued an update reminding trustees and scheme managers that connecting to the MoneyHelper Pensions Dashboards is only the first stage of the process.
The update emphasised the importance of ongoing compliance with dashboard requirements and the maintenance of high-quality member data.
Further guidance was published on 18 June 2026 by the Pensions Administration Standards Association, to help schemes monitor and maintain compliance.
The PDP expects pensions dashboards to become available to the public during the 2027/28 financial year and has indicated that it will provide a further update on launch timing around the statutory connection deadline of 31 October 2026.
The PDP have also confirmed that, alongside the MoneyHelper Pensions Dashboard, it is intended that other organisations will be able to offer Private Sector Dashboards (PSDs). Organisations that operate PSDs will need to comply with requirements set by the FCA, the Money and Pensions Service (MaPS), and the DWP. The PDP has reiterated that its immediate focus remains on the successful delivery of the MoneyHelper Pensions Dashboard, with PSDs expected to follow thereafter.
Collective DC updates
Spring 2026 saw further progress in the development of the UK's CDC framework. In May, TPR laid its updated CDC Code of Practice before Parliament and published its response to the industry consultation, providing greater clarity on the authorisation and supervision of unconnected multi-employer CDC schemes (UMES). This is an important step in extending CDC beyond single-employer and connected-employer arrangements and creates a clearer route to market for future providers.
The DWP also published a partial response to its consultation on the expansion of CDC provision, including measures intended to facilitate transfers into authorised CDC arrangements in certain circumstances. Together with the regulations enabling UMES, which came into effect from 31 July 2026, the core legislative and regulatory framework for a wider CDC market is now in place.
The focus now shifts from policy development to implementation. While it remains to be seen how quickly providers bring forward new propositions, the framework is designed to support CDC arrangements serving multiple unconnected employers, potentially broadening access to the model significantly. The industry continues to monitor the development of Retirement CDC arrangements. Although these are unlikely to become available before 2028, they have the potential to provide trustees with an additional option when considering how best to deliver sustainable retirement income for DC members.
Quick updates
- Torsten Bell has been reappointed as Pensions Minister under the Government of new Prime Minister Andy Burnham, which should provide consistency at an important time for the industry.
- HMRC published a technical note in May 2026, providing further information on how Inheritance Tax (IHT) on pensions benefits in scope will be identified, valued and allocated to beneficiaries with regulations due to be finalised later this year. HMRC also published draft regulations in May with final guidance and other supporting material to be made available ahead of 6 April 2027.
- Provisions from the Data (Use and Access) Act 2025 came into effect on 19 June 2026. The Information Commissioner’s Office has published guidance to help data controllers regarding the new legal requirement to have a formal mechanism and communication process for data protection complaints.
- HMRC has notified pension schemes that the Pension Schemes Online service will be withdrawn from April 2027. Schemes are required to migrate to the Managing Pension Schemes service and are asked to complete this by 31 December 2026 to avoid any disruption to scheme administration.
- MaPS launched their new DC pensions guide in June which replaces the 2015 guide, "Your pension: your choices". It aims to help people understand their retirement options, notes actions they may need to take and provides guidance and support information.
- The Government has confirmed, following discussion in the House of Lord’s on 30 June, that it will review the rules around pension access for members with a terminal diagnosis (less than 12 months life expectancy) “to ensure a fair and compassionate approach” and in recognition of the “hurdles” some experience in obtaining payments. There was also mention in the debate of early access to the State pension, although there no plans to change how this is accessed.
Large schemes research
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