HL Pensions Law Digest 15 September 2025

Welcome to our latest update, in which we cover:

Pension Schemes Bill: where are we now?

• Points of interest from recent Committee debates;

Bridging pensions: interpretation of statutory reference

• A decision that a bridging pension ceased at 65, not State Pension age;

Pension fraud: trustees’ duties on transfer

• A detailed examination of trustee duties by the Pensions Ombudsman;

Pensions Regulator (TPR): impersonation fraud

• A warning about increasingly sophisticated scams;

Pensions Regulator (TPR): administrator relationships

• A report from TPR on good practice and areas for improvement.

Pension Schemes Bill: where are we now?

The government’s amendments to the Pension Schemes Bill continue to be debated in Parliament. While hundreds of amendments were tabled, most of these are technical and improve the drafting without reflecting a change in policy intent. However, some key clarifications have come from the debates, which include the following.

Release of surplus from defined benefit (DB) arrangements

• The government is minded to amend the funding threshold at which surplus can be released, from the current buy-out threshold to full funding on a low dependency funding basis.
• Details of the revised funding threshold will be set out in draft regulations, potentially subject to consultation in Spring 2026.

Pre-97 increases

• The Pensions Minister was pressed on the issue of introducing increases for pre-97 pensions. He responded that:
  • The changes on release of surplus give a new route for trustees who do not have a unilateral power to make discretionary increases to pensions to discuss pre-97 increases with the sponsoring employer; and
  • For ongoing schemes, the government is not going to legislate to overwrite scheme rules concerning indexation of pre-97 benefits.

Abolition of PPF / FCF administration levy

• The Society of Pension Professionals (SPP) promoted an amendment to abolish the administration levy for the Pension Protection Fund (PPF) and the Fraud Compensation Fund (FCF), while allowing the expenses of the PPF and the FCF to be met out of their general funds.
• The Pensions Minister acknowledged industry concerns about the current levy arrangements and gave an assurance that the government intends to lay amendments at a later stage to achieve the same aim. On this basis, the SPP-backed amendment was withdrawn.

Contractual override for FCA-regulated pension schemes

• As a reminder, the new contractual override power to enable without-consent transfers from personal pension schemes may only be exercised where an independent person certifies that a new “best interest” test has been met.
• Provisions in the Bill have been amended to strengthen consumer protection, so that regulations must set out requirements which the independent person must meet.

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Bridging Pensions: decision by the High Court 

The High Court has ruled that a member’s bridging pension ceased at age 65, not when she reached State Pension age (SPA) at age 66 (Spirit (Legacy) Pension Trustee Limited v Alexis).

Background

• Mrs A was a member of a final salary scheme with a normal retirement age of 60. She left pensionable service in 2006 and became a deferred member.
• In July 2018, the scheme administrator wrote to Mrs A explaining, among other things, that a bridging pension would be payable to her and that this would “cease at State Pension Age”.
• Mrs A turned 60 and retired from the Scheme in October 2018.
• Rule 5.5 of scheme rules introduced in 2001 defined “State pension age” as having:
  • “the meaning given by the rules in paragraph 1 of Part I of Schedule 4 of the Pensions Act 1995 (rules for equalisation of pensionable ages for men and women)”.
• A dispute arose over whether Mrs A’s bridging pension ceased at age 65 (her SPA in 2001 when the rules were introduced) or at 66 (her SPA under subsequent amendments to the Pensions Act 1995 (the “1995 Act”)). The argument hinged on whether the definition of “State pension age” in Rule 5.5 was:
  • “static”, with the meaning in the 1995 Act applicable in 2001 (argued for by the Trustee); or
  • “dynamic”, encompassing subsequent amendments to the 1995 Act (argued for by Mrs A).
• The Pensions Ombudsman (TPO) upheld Mrs A’s complaint and determined that the definition of “State pension age” in Rule 5.5 was dynamic. In reaching this conclusion he considered case law on the construction of pension scheme deeds, in particular the decision of the Supreme Court in Barnardo’s v Buckinghamshire and ors.
• The trustee was given permission to appeal TPO’s decision on points of law. A condition of the appeal was that neither party could recover the appeal costs from the other. This meant that Mrs A was not at risk of having to pay the Trustee’s costs if the appeal was decided against her.

Consideration by the High Court

• The High Court concluded that:
  • The proper construction of Rule 5.5 was a static one; and
  • Mrs A’s bridging pension therefore should have ceased at age 65 and not at age 66 (when she reached her SPA).
• In reaching this conclusion, the judge considered that:
  • The reference to the 1995 Act in Rule 5.5 was a “convenient shorthand”. Given the complexity of the provisions in the 1995 Act setting out SPA for men and women, it was unsurprising that Rule 5.5 used a statutory reference, rather than reproducing the statutory text. Using this drafting technique did not suggest an intention to refer to the legislation as it might apply from time to time;
  • This use contrasted with other legislative references in the 2001 Rules which did perform a “normative function”, for example by requiring compliance with legislation on “contracting-out” or “preservation of benefits”;
  • The express words in Rule 5.5 (“rules for equalisation of pensionable ages for men and women”) indicated that the reference to the 1995 Act was not intended to encompass future changes to increase SPA more generally; and
  • A scheme booklet which referred to the bridging pension being paid until “State Pension Age”, defined as “the age at which you become eligible for pension benefits from the State” was not relevant to the judge’s decision.

Comments on the High Court decision

• The decision in Mrs A’s case seems out of kilter with previous pension cases, in particular those concerning the interpretation of pension indexation rules following the replacement of the retail prices index (RPI) with the consumer prices index (CPI) in the statutory pension increase requirement.
• Mrs A did not have legal representation at the appeal. Although the Trustee brought certain matters adverse to its case to the judge’s attention, it may be that counter-arguments to the Trustee’s claims were not properly presented to the judge.
• The judge acknowledged that his decision to allow the appeal was largely based on legal arguments which had not been aired before TPO. Some of his reasoning suggests that he may not have had the benefit of certain arguments which a lawyer with a knowledge of pensions could have made on Mrs A’s behalf.
• For example, the judge thought it of significance that, if a dynamic interpretation of Rule 5.5 had been intended, this could have been more simply achieved by reference to the “actual receipt of a state pension, without any need to refer to the relevant legislation at all”. In reality, a bridging pension provision worded in this way would not work – there are various reasons why an individual member might not actually receive a state pension at SPA (including if the individual chose to defer their state pension or if s/he had lived abroad and had an insufficient National Insurance record for entitlement to state pension).

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Pension Fraud: trustee duties on transfer

The Pensions Ombudsman (TPO) has issued a determination rejecting a member’s complaint that the trustee of the British Steel Pension Scheme (BSPS) had failed to conduct sufficient due diligence before transferring his pension to a small-self-administered scheme (SSAS), which ultimately led to significant financial loss.

TPO’s detailed and sensible determination gives a helpful overview of trustees’ duties when implementing a member’s request for a statutory transfer between two occupational pension schemes.

Background facts

• Mr D was an active member of the BSPS from March 2004 to January 2008. He then became a deferred member.
• In the course of 2013, Mr D requested (through different third parties) a transfer value quotation three times. Transfer value quotations were issued in response to each request but it appeared Mr D then took no further action.
• In 2014, Mr D received an unsolicited approach from a different unregulated introducer, offering him a free pension review. The introducer requested a transfer value quotation on Mr D’s behalf. The BSPS administrator sent the introducer a transfer value pack, including a copy of the Pensions Regulator (TPR)’s Scorpion Leaflet.
• On 11 August 2014, the SSAS provider requested a transfer of Mr D’s benefits on his behalf. Alongside the transfer request, the BSPS was sent:
  • Confirmation that the SSAS provider was able to accept the transfer;
  • Notification that the SSAS had been registered with HMRC on 5 August 2014;
  • A copy of TPR’s Scorpion Leaflet, confirmed as having been read by Mr D and signed and dated by him;
  • Confirmation that Mr D was employed by the sponsoring employer of the SSAS;
  • A copy of the SSAS trust deed and rules, which appointed Mr D as sole trustee;
  • A letter from a solicitors’ firm, confirming that it had drafted the trust deed and rules for the SASS provider and that they were appropriate for use in relation to single-member SSASs;
  • A transfer request letter signed and dated by Mr D, confirming that: he was aware of the issues relating to pension liberation; he had carefully considered his transfer request; and he had not been offered any cash or other incentive to transfer;
  • A transfer value discharge form signed by Mr D on 11 August 2014, authorising the trustee to pay the transfer value to the SSAS;
  • A member declaration signed by Mr D, stating that he had read and understood the terms of TPR’s Pensions Liberation Fraud leaflet, and confirming that the transfer value was being paid to a registered pension arrangement; and
  • An employment agreement dated 24 July 2014 and signed by Mr D, showing that: the registered office of Mr D’s employer was his home address; he was the managing director of the employer; and he was to work from home.
• On 1 September 2014, the trustee confirmed to Mr D that his all his benefits under the BSPS had been transferred.
• It appeared that Mr D’s SSAS had invested his funds in a fractional share of an overseas resort hotel room. TPO’s Adjudicator later commented that it was likely that Mr D would have lost most, if not all, of the value of his pension.

Mr D’s complaint

• A claims management firm (MRL) complained on Mr D’s behalf that the Trustee should have:
  • Assessed Mr D’s transfer request carefully;
  • Identified various warning signs indicated in the Scorpion Leaflet; and
  • Contacted Mr D directly to inform him of the warning signs and to establish his understanding of the receiving scheme.
• The complaint was rejected at both stages of the scheme’s internal dispute resolution procedure (IDRP).
• A TPO Adjudicator also concluded that no further action was required by the Trustee. Mr D did not accept the Adjudicator’s opinion, so his complaint was considered by TPO.

Pensions Ombudsman’s decision

• TPO concluded that there was no legislative, common law or regulatory obligation on the Trustee to carry out the due diligence that MRL argued was required.
• In addition, the Trustee had not voluntarily assumed a responsibility to carry out the due diligence listed in the Action Pack or to warn Mr D if red flags emerged.
• Some details of TPO’s reasoning are given below.

Relevance to Mr D of increasing protections for members against pension scams

• TPR noted that in February 2013, TPR had produced:
  • A leaflet for members (the “Scorpion Leaflet”); and
  • An Action Pack, aimed at pension professionals.
• TPR issued an updated version of the Action Pack on 24 July 2014. MRL argued that the Trustee had not undertaken the proactive steps expected in the 2014 version (such as speaking to Mr D). TPO considered that:
  • As Mr D’s transfer request was dated 11 August 2014 and the transfer was paid on 1 September 2014, it would have been reasonable and appropriate for the Trustee to have still considered the 2013 version of the Action Pack; and
  • Such continued use fell within the grace period which TPO’s office has historically allowed for trustees and administrators to put in place new processes and procedures.
• The timing of a transfer request affected the legal obligations of the transferring trustees. TPO noted in particular that Mr D’s transfer request predated:
  • The requirement from April 2015 that trustees check that a member has received “appropriate independent advice” before transferring a defined benefit (DB) transfer value of more than £30,000; and
  • The introduction of the “transfer conditions” requirements applicable to transfers from 30 November 2021.

Was there a statutory or regulatory obligation to follow the due diligence checklist in the Action Pack?

• It appeared to be common ground between the parties in Mr D’s case that the transfer was a statutory transfer from one occupational pension scheme to another.
• TPO considered the requirements for a statutory transfer (such as that the member should receive transfer credits in the receiving scheme) and that there was no argument that the requirements had not been met.
• TPO noted that on a statutory transfer, the transferring trustee is required to carry out the transfer within (for a DB transfer) six months of the guarantee date. TPR had power to extend the deadline in prescribed circumstances but these did not include undertaking additional due diligence as suggested by MRL.

Legal status of the Scorpion Leaflet and Action Pack

• TPO concluded that there was no legislative or regulatory obligation on a transferring trustee of an occupational scheme either to:
  • Follow the due diligence Checklist, or other requests contained in the Action Pack; or
  • Provide members with the Scorpion Leaflet.
• In reaching this conclusion, TPO noted that:
  • Legislation governing transfers and disclosure do not impose obligations on transferring trustees in relation to the Scorpion Leaflet or Action Pack; and
  • TPR had not issued the contents of the Action Pack as a “code of practice”.

Did the Trustee owe a duty of care to Mr D?

• TPO considered whether the Trustee might owe a duty of care under common law or equity to carry out due diligence as suggested in the Action Pack and to inform Mr D, and concluded that it did not.
• In particular, it was a well-established principle that a common law duty of care will not usually arise where this would hinder performance of a statutory obligation. In the context of statutory pension transfers, imposing a duty to carry out further due diligence beyond that required by legislation would inhibit transferring trustees from meeting their statutory transfer obligations.
• TPO also discounted arguments based on the “best interests of the beneficiary”, noting that the Courts have moved instead towards the “proper purposes” principle when considering trustees’ duties. The purpose of a scheme is to pay benefits in accordance with scheme rules and overriding legislation, not to act as a “holistic financial or retirement solution for the member”.

What about a voluntary assumption of a duty?

• TPO concluded that the Action Pack invited trustees to review the Checklist but it was the Trustee’s choice whether to do so or not.
• TPO commented that if trustees voluntarily decided to carry out the due diligence suggested by the Action Pack and informed the member of this:
  • It might be that a duty of care would arise to carry out the due diligence with reasonable skill (if it was also reasonably foreseeable that the member would reasonably rely on the trustees’ due diligence); but
  • The member would still have to meet the other requirements for a claim in negligence for economic loss; and
  • on many previous cases, members’ claims have failed on causation, as it was found that the member would have transferred anyway even if a warning had been given.
• In Mr D’s case, TPO found that the Trustee had made no representation to him to suggest that it was carrying out due diligence beyond that required to check that SSAS met the statutory conditions for a receiving scheme.
• The Trustee had therefore not voluntarily assumed a duty of care to Mr D.

Applicability of determination in Mr D to other transfers

• TPO emphasised that his determination in Mr D’s case concerned a statutory transfer between two occupational pension schemes. Different factors would be relevant to:
  • Transfers involving personal pension schemes, where the pension provider would fall within the requirements of the FCA Handbook; and
  • Non-statutory transfers carried out under power in a scheme’s rules.

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Pensions Regulator: impersonation fraud

The Pensions Regulator (TPR) has issued a blog and an Industry alert warning schemes about increasingly sophisticated techniques being used by scammers to impersonate members. Key points include the following.

• Scammers are exploiting security vulnerabilities to hack members’ email accounts and gain access to their correspondence with their pension scheme.
• Stolen data from the pension scheme correspondence may then be used to impersonate the member to the scheme, including to:
  • Change the details of the bank account receiving the member’s pension benefits; or
  • Arrange a transfer of the member’s benefits to false pension accounts set up in the member’s name.
• Scammers may also divert a deceased member’s pension funds to an alternative bank account, without the knowledge of the next of kin.
• Members aged between 50 and 69 are found to be most at risk.
• Advances in artificial intelligence (AI) enable fraudsters to develop even more convincing communications, including communications impersonating official bodies such as the Financial Conduct Authority (FCA) and the Fraud Compensation Fund (FCF).
• Schemes are recommended to:
  • Educate members and encourage them to increase their online security by opting for two-step verification;
  • Review their security measures, including member identity and verification checks (see recent helpful PASA guidance); and
  • Report fraud or cybercrime to Action Fraud.

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Pensions Regulator: administrator relationship 

The Pensions Regulator (TPR) has issued a Market oversight report on administrator relationships, following the launch of its voluntary engagement initiative in September 2024. TPR reports that over the past year it has engaged with 15 pension administrators, focussing on the following key themes. Points to note include:

• Financial sustainability:
  • Although investment in administration is increasing, more work is required to meet member expectations and to prepare for forthcoming legislative and regulatory developments, including pension dashboards;
• Technology and innovation:
  • Service level agreements should prioritise accuracy and member experience, not simply speed;
  • While innovations aimed at improving member experience are being introduced, outdated systems and poor quality data remain a significant challenge;
• Risk and change management:
  • Regulatory change (including pension dashboards, GMP equalisation and value for money) is creating additional pressure on administration;
  • Many administrators have dedicated change management teams, who consider how future changes to law or regulation will impact operations;
  • Having clear governance models and tools such as live risk dashboards can help to identify and manage risks early;
• Cyber resilience:
  • Although many administrators hold or align with international standards and adopt schemes backed by the UK government, such as Cyber Essentials or Cyber Essentials Plus, certification across the industry is inconsistent;
  • There are gaps in business continuity planning, including weaker assessment and management of supplier risk;.
  • TPR recognises good practice found at some administrators, including strong testing routines and oversight at a senior level; and
  • Trustees and administrators are encouraged to review TPR’s Cyber security guidance and to ensure that they have access to appropriate cyber expertise.

Looking ahead, TPR plans to develop a new administration strategy and to update its administration guidance.

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Authored by Jill Clucas.