UK Public Service Pensions Update: December 2025

As part of her Autumn Budget, the chancellor confirmed that Finance Bill 2026-27 will amend stamp duty land tax rules so that "property transferred within Local Government Pension Schemes are subject to an SDLT relief".

A number of other pensions-related changes were also announced, including to salary sacrifice for pensions contributions and in connection with the April 2027 change to the inheritance tax treatment of unused defined contribution pension funds and some lump sum death benefits. (Read more in the UK Budget entry in the All Schemes section below.)

Pension Schemes Bill | Key LGPS amendments at report stage

At report stage earlier this month, the Pension Schemes Bill was amended to:

• change the definition of asset pool company in clause 1(9)(a) so that a company can be an asset pool company either if its shareholders consist only of scheme managers or if it only has one shareholder, being a company whose shareholders consist only of scheme managers;
• make a follow-on amendment to clause 1(9)(b) (when a scheme manager participates in an asset pool company);
• adjust clause 2(2)(c) to reflect "a policy intention for the regulations to require each authority to co-operate (in relation to developing local investment opportunities) with the strategic authority whose area covers the area of the scheme manager." Also to exclude the Environment Agency from this obligation because its area is the whole of England;
• replace clause 4 with a different public procurement exemption for certain investment management contracts between LGPS scheme managers and asset pool companies. The new clause contains more detail. It will also put the LGPS exemption directly into the Procurement Act 2023 with the intention, we understand, of future-proofing it against changes to that Act.

A number of other amendments were also made to the bill. (These are discussed in the Pension Schemes Bill entry in the All Schemes section below.)

Data protection | Updated privacy notice templates

Administering authorities now have access to an updated template full privacy notice and summary privacy notice following their publication by the Local Government Association (LGA) on 16 December.

The templates have been updated to incorporate changes relevant to the requirement to connect to Pensions Dashboards and changes made to UK data protection law by the Data (Use and Access) Act 2025.

Osborne Clarke was delighted to collaborate with and support the LGA to prepare these items.

Investment | New stewardship guidelines and FCA ESG ratings consultation

Pensions UK has published its Stewardship and Voting Guidelines 2026. Updates focus on areas such as AI and cybersecurity, governance, climate and sustainability, social factors and workforce, equality, diversity and inclusion, emerging trends and pass-through voting.

The Financial Conduct Authority (FCA) is consulting on proposed rules and guidance for the regulation of ESG ratings providers.

The consultation is open until 31 March 2026. The FCA plans to publish a Policy Statement with final rules in Q4 2026 and the new regime will come into effect on 29 June 2028 (from which date any firm wishing to provide certain types of ESG ratings in the UK will need FCA authorisation).

Investment | TPR report on private markets barriers due in 2026

The Pensions Regulator (TPR) is engaging with the pensions industry to better understand the barriers to investment in private markets and infrastructure, with an emphasis on UK investment opportunities.

TPR has been engaging with investment consultancies, key pension schemes, a range of industry representative bodies and others. It plans to complete its engagement by the end of 2025 and share findings with the government and publish a market oversight report next year.

The report could provide useful insights for LGPS funds.

All schemes

UK Budget | Chancellor announces salary sacrifice and other changes affecting UK pensions

The chancellor delivered her Autumn Budget on 26 November 2025. Despite no income tax rate rises, a substantial number of tax measures were announced and policy documents and consultations were published, intended to improve economic growth and investment and strengthen the tax base.

For pensions, the key announcement was that salary sacrifice for pension contributions will be restricted from April 2029. The national insurance contribution exemption will only apply to the first £2,000 of salary sacrificed each tax year.

Further information was also provided about the April 2027 change to the inheritance tax treatment of unused defined contribution pension funds and some lump sum death benefits.

Our Insight contains more information about these and the other pensions-related announcements. Since its publication:

• HMRC has published a pension schemes newsletter giving more detail about some of the changes announced;
• the Finance No.2 Bill, including an updated draft of the inheritance tax and pensions legislation, has started its journey through Parliament;
• the National Insurance Contributions (Employer Pensions Contributions) Bill has begun its journey through Parliament. The bill gives the government power to set, by regulations, a “contributions limit”, above which annual salary sacrifice will be subject to national insurance. The limit must start at £2,000 but can be increased or decreased by subsequent regulations. The detail, including how the contributions limit will apply in different pay scenarios, will also be set out in regulations;
• HMRC has published a tax information and impact note about the salary sacrifice change. Among other things, it estimates that 44% of employees using salary sacrifice for pensions contributions will be affected by the measure; and
• the Pension Schemes Bill has been amended to provide for annual consumer prices index (CPI) increases, capped at 2.5%, on pre-6 April 1997 benefits for members of the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) where the original scheme rules required that pre-1997 pension be increased once in payment.

Pension Schemes Bill | Report stage amendments – bill moves to Lords 

A number of amendments were made to the Pension Schemes Bill at report stage earlier this month. These include the following:

• adjustments to the provisions intended to provide a way forward for schemes (including public service schemes) affected by the Court of Appeal's decision in the Virgin Media case (legal effect of not being able to evidence actuarial confirmation in relation to a change made to a scheme contracted-out on the reference scheme basis);
• minor changes to the defined contribution (DC) small pots provisions, and adjustments to clauses relating to the DC main scale default arrangement requirements;
• a change to remove the PPF administration levy, which meets the administration costs of the PPF and Fraud Compensation Fund, from 1 April 2026; and
• the amendment (mentioned at the end of the UK Budget section, immediately above) to provide annual CPI increases on pre-6 April 1997 benefits for some members of the PPF and FAS.

The bill has now moved to the House of Lords.

Administration | TPR consolidates guidance and adds new expectations

TPR has published updated guidance on pension scheme administration. The guidance consolidates all administration expectations for trustees, scheme managers and administrators and applies to all scheme types.

The accompanying press release explains that "TPR has refreshed [its] guidance to provide clearer clarifications on key administration activities and considerations, specifically around member communications, data management, disaster recovery and business continuity planning. [The] guidance also introduces several new elements such as:

• calling out the importance of having a policy to plan administration and having robust arrangements in place to enable the effective oversight of outsourced or inhouse administration;
• introducing guidance on IT system governance, including assurance on system adequacy, change control processes, technological benefits with proper oversight, and regular backups; and linked up with TPR’s existing cyber guidance;
• broadening performance measurement beyond time-based commitments for true reflection of the quality and accuracy of the administration service.

Governing bodies should use this guidance as a practical framework to strengthen administration, improve oversight, and build effective partnerships with administrators."

Member data | TPR issues market oversight report and updated guidance

TPR has published a market oversight report on data quality and updated guidance setting out its expectations in relation to member data.

The market oversight report explains how TPR intends to continue engaging with schemes on member data, sets out insights (key takeaways) and reminds governing bodies that they "must ensure that data improvement work is delivered so that they are able to meet their dashboards duties, and this needs to cover both the data used to find savers in records (‘match’ data) and the information they need to return to savers (‘value’ data)" but that there are many other reasons why high quality member data is important.

The updated guidance reminds governing bodies that they are accountable for the quality of member data and have a legal duty to ensure that their scheme has governance and internal controls in place to monitor and improve data, even if they delegate some aspects to administrators or sub-committees. Governing bodies should take an active role in the management of member data and, as part of this, keep up to date with relevant developments and best practice. There are also sections on defining scheme member data, assessing member data quality, data quality improvement plans (at present, "frequently informal or fragmented") and maintaining data quality.

To support schemes as they respond to TPR's updated guidance, the Pensions Administration Standards Association has shared a webinar recording, new guidance and a data improvement plan template.

Pension scams | TPR calls for pledge sign-up; webinar planned for spring

As it took part in the BBC's Scam Safe week at the end of November, TPR reminded trustees, managers and administrators that they are the first line of defence against pension scams, called on schemes who have not signed up to the Pledge to Combat Pension Scams to do so and urged those who have signed up to go further and self-certify they are turning their commitment into action.

The blog post also confirms that TPR will run a webinar in the spring to help educate industry on scams and further promote the pledge.

Overpayments | New Ombudsman factsheet – share with affected members

The Pensions Ombudsman has published a factsheet to help pension scheme members to understand the main issues that arise when a pension has been overpaid.

In a related news item the ombudsman says that it "would like schemes to share this information with a member, ideally when informing them of an overpayment, or when a member queries or challenges the scheme’s attempt to reclaim an overpayment, so that members have a better understanding of this complex area."  

It hopes that this will help parties to work together to agree whether, how and over what period an overpayment should be recovered, and so reduce the number of complaints to the ombudsman and facilitate the resolution of any that are made.

Data (Use and Access) Act 2025 | Six action areas for schemes

The Pensions Administration Standards Association has published a paper, "The Data (Use and Access) Act 2025 Unpacked: Six key areas for pension schemes". It lists six key areas upon which schemes need to act.

Funds should also consider taking legal advice on the Act and action needed to ensure compliance.

Improving standards | DWP consultation on trusteeship and administration

The Department for Work and Pensions is consulting on improving the standards of pension scheme trusteeship, governance and administration. The consultation is primarily relevant to the trustees and administrators of private sector pension schemes. However, some of the proposals in it, including those relating to scheme administrators and administration services, could have implications for public service pension schemes.

The consultation is open until 5 March 2026.

Firefighters' pensions | Contribution structure and retained firefighter changes confirmed

The Home Office and MHCLG have published their response to the 2024-25 consultation on changes to the 2015 Scheme (England) Regulations 2014 to update the member contribution structure.

The revised structure will be implemented through amendments to the 2015 Scheme (England) Regulations 2014. The changes will "take effect from 1 April 2026, in line with the start of the new scheme year, with [a] CPI uplift effective from 1 April 2027."

MHCLG and the Home Office have also published the response to the 2024-25 consultation on a series of proposed changes to the Firefighters’ Pension Scheme regulations to provide retrospective pension entitlement to part-time, retained firefighters, who were excluded from scheme membership. The government intends to implement the proposals consulted upon, with some changes, and MHCLG intends to take forward legislation to implement the changes.

Police pensions | Revised contribution structure from April 2026

The Home Office has published its response to the 2024-25 consultation on amendments to the Police Pensions Regulations 2015 to update the member contribution structure.

The response confirms that the government will implement "a revised member contribution structure that reflects the feedback received…The existing three-tier structure will be retained… The thresholds for each contribution tier will be increased in line with known pay increases since 2015…Member contribution tiers will now be determined based on a member’s actual pensionable pay from the previous scheme year, rather than full-time equivalent salary" and "[c]ontribution thresholds will continue to be reviewed as part of the regular scheme valuation cycle, rather than being automatically uplifted by a fixed index such as CPI."

The revised structure will be introduced by amendment of the Police Pensions Regulations 2015 with effect from 1 April 2026.

The Pensions Ombudsman  | Recent decisions

Limited due diligence duties for non-statutory transfers between February 2013 and end of November 2021 (CAS-54901-V6R7)

In the October edition, we reported that the Pensions Ombudsman had decided that, where trustees had checked that the member had a statutory transfer right, there was no free-standing legislative or regulatory requirement for them to conduct the due diligence contained in the 2013 or 2014 Pensions Regulator pensions liberation fraud action pack, or to send the regulator's Scorpion leaflet to members.

The Deputy Pensions Ombudsman has since reached a similar conclusion in a case involving a non-statutory transfer.

Key takeaway

Consider the decisions in these cases if you are dealing with a complaint about a transfer made between February 2013 and the end of November 2021 where the member is arguing that the scheme should have conducted the due diligence in TPR's 2013 or 2014 pensions liberation fraud action packs and warned them of any indications of a scam.

Change of position defence succeeds in widower's pension case (CAS-45784-C3T2)

The Pensions Ombudsman has decided that a widower, Mr E, has a change of position defence in relation to the recovery of around £33,000 of overpaid widower's pension.

Under the regulations that applied to Mrs E's pensionable service, a widower's pension would cease on remarriage. Newsletters sent to Mr E and other members asked that they notify the scheme if they were in receipt of a survivor's pension and entered into a new relationship (or words to that effect). However, Mr E had sent an e-mail asking whether payment of his widower's pension would continue if he remarried and had received a reply confirming that it would.

Key takeaway

Where a survivor's pension ceases on remarriage, civil partnership or cohabitation, ensure award letters and subsequent communications clearly state this condition and the consequences of remarrying, entering a civil partnership or cohabiting.

Also ensure that anyone answering telephone, e-mail or other queries is aware of the possible consequences of providing inaccurate information and that responses are checked (where necessary) before being sent.

House of Commons Library | New and updated briefing papers

Recent House of Commons Library briefing papers of interest include:

• National Insurance Contributions (Employer Pensions Contributions) Bill
• Budget 2025 and the Finance No.2 Bill
• Autumn Budget 2025: a summary
• Pension Schemes Bill 2024-25: Progress of the bill
• What was agreed at COP 30?
• Pensions tax
• Mineworkers' pensions
• Pension FAQs: occupational and personal pensions.

This newsletter covers developments relating to public service pensions in England with a focus on the Local Government Pension Scheme.