Surplus safeguards under focus
The question of how schemes can use surpluses has been one of the most contested points. MPs have proposed measures to tighten disclosure requirements and strengthen actuarial oversight before surplus payments to employers are made. Other suggestions include dedicating a share of surplus funds to free financial advice for members.
The Association of Professional Pension Trustees (APPT) has argued that any surplus framework must balance flexibility with robust protections. It supports surplus release where schemes are demonstrably well-funded, backed by statutory overrides to address inconsistencies in trust rules. It stresses that extraction should be permitted only at high levels of security, such as full buyout and always with trustee consent. Independent actuarial certification, member notification and oversight from The Pensions Regulator (TPR) are among the safeguards the APPT recommends.
The APPT has also urged Government to review the tax treatment of surplus, describing the current regime as a disincentive to responsible management. Conditional relief, it argues, could encourage surpluses to be used to enhance benefits or transferred to master trusts. Proposals have also suggested that surpluses could be used to enhance member benefits, fund defined contribution (DC) schemes or provide advice, with trustees following a clear due-diligence process to ensure member interests are protected.
Pre-1997 indexation debate
Another theme gaining momentum is whether to extend indexation rights for service before 1997. Amendments have proposed discretionary indexation where funding allows, supported by regulatory oversight, as well as a review of trustee duties in relation to these benefits. Industry groups and campaigners have long highlighted disparities in indexation rules, with growing pressure for reform of both the Pension Protection Fund (PPF) and Financial Assistance Scheme. Further proposals have called for abolition of the PPF administration levy, with costs instead met from the PPF’s general resources. Supporters argue this would reduce burdens on schemes while maintaining protection for members.
Default investment powers remain controversial
The Government’s plan to introduce reserve powers to mandate certain asset allocations has divided opinion. Ministers argue that new powers are needed to encourage greater investment in UK productive assets, such as private equity and infrastructure, while opponents warn that this risks undermining trustee independence.
Proposals include confining asset allocation requirements to default funds, imposing sunset clauses, and requiring secondary legislation before the powers could be enacted. Critics stress that any mandated allocation could conflict with fiduciary duty, particularly if trustees are compelled to invest in sectors that do not align with member interests.
Strengthening value-for-money and member engagement
Alongside DB reforms, amendments have also addressed value-for-money (VFM) rules for DC schemes. Proposals include extending the VFM framework to hybrid schemes, factoring in the quality of member advice and assessing the impact of transfer delays. Some MPs have backed calls for free, impartial guidance at age 40 and again five years before retirement. Auto-enrolling members into Pension Wise sessions at key decision points, with the option to opt out, was also suggested.
Campaigners argue this would significantly improve engagement and informed decision-making. The Bill is also expected to accelerate the development of guided retirement solutions. Trustees may be required to offer default pathways for unengaged members, with clear responsibilities and alignment to Financial Conduct Authority (FCA) proposals on Consumer Duty.
Small pots and consolidation
The Government’s plans for small pots consolidators also remain under scrutiny. Alternative proposals include allowing pots to follow members automatically from job to job and raising the consolidation threshold from £1,000 to £2,000, with regular reviews. These changes aim to improve efficiency while ensuring consolidation delivers value without disadvantaging members.
Industry voices on reform
The APPT is not alone in stressing caution. The Investing and Saving Alliance (TISA) welcomed elements of the Bill, such as guided retirement products, but warned that default solutions must not trap members in inappropriate or irreversible choices. Flexibility to ‘move away’ from defaults remains essential, it argued.
TISA also cautioned against blanket scale requirements, warning that these could force out high-performing smaller schemes while leaving average larger schemes untouched. This, it said, risks creating a market dominated by a handful of providers, reducing competition and consumer choice. Other industry groups, including Pensions UK and the Association of Consulting Actuaries (ACA), have also voiced concern that mandatory asset allocation powers could undermine fiduciary duty and increase risks for savers.
Luke Carter, Regulatory Consultant at Equiniti said,
“The committee stage has highlighted just how many complex issues are tied up in this Bill, from surplus use to indexation and default investment powers. At a time when pension schemes need clarity, it is vital that reforms balance security and flexibility while avoiding unintended risks for savers. Equiniti will continue to monitor developments and support clients as the details become clearer.”