It’s been a rather momentous few weeks in pensions, with the Pension Schemes Bill receiving Royal Assent and guidance from HMRC on the forthcoming pensions and inheritance tax (IHT) changes.
Other developments include an update from the Pensions Ombudsman (TPO) on funding, the Pensions Commission’s interim report on retirement adequacy, the Pensions Regulator’s (TPR) new collective defined contribution (CDC) code of practice, corporate strategy and artificial intelligence (AI) plan, and finally, finalisation of the Financial Reporting Council’s Virgin Media legislative remedy guidance for actuaries.
TPO’s performance ‘unlocks additional funding’ from DWP
TPO has announced that its recent ‘record performance’ has led to a new three-year funding arrangement from the Department for Work and Pensions that means it can increase its frontline casework teams by 20% in 2026/27. Since the introduction of its Operating Model Review changes two years ago, TPO has increased case closures by 63% in the face of a 58% increase in demand for its services. TPO is planning to make technological investments including the use of AI to assist case progression alongside progressing its existing Operating Model Review programme. TPO’s corporate plan for 2026/27 can be accessed here – its two strategic goals are to provide an “efficient, accessible and quality service” and to be an “authoritative voice for improvement in the pensions industry”.
Legislation
National Insurance Contributions (Employer Pensions Contributions) Act 2026 received Royal Assent on 29 April 2026
On 29 April 2026, the National Insurance Contributions (Employer Pensions Contributions) Act 2026 received Royal Assent. This introduces a £2,000 cap on National Insurance Contribution relief as from 6 April 2029 on employee pension contributions made through salary sacrifice. The House of Lords’ attempt to increase the cap to £5,000 was soundly rejected by the House of Commons. Further detail of the change will be provided in regulations and HMRC guidance.
King’s speech – no pensions announcements
As anticipated, the King's Speech on 13 May 2026, did not include any pensions-related legislative announcements. This reflects the recently delivered major reforms being introduced by the Pension Schemes Act 2026. As the House of Lords’ briefing on the Speech explained, the Speech sits against a backdrop of ongoing policy reviews that could shape future reform including the third statutory review into state pension age that was started in July 2025 and the work of the Pensions Commission on pensions adequacy and retirement outcomes. Both are expected to report in 2027 and may inform longer-term policy and legislative change.
Pensions Commission’s interim report on pension adequacy
On 19 May 2026, the second Pensions Commission published its 190 page interim report supported by a detailed evidence pack setting out the challenges facing the UK pensions system through to 2050. The report includes preliminary conclusions which will inform a final report, expected in 2027, addressing how to avoid “tomorrow’s retirees” being “worse off than today’s”.
The headline finding is that, whilst key elements of the current framework are working well, voluntary savings have not developed as expected. Although the first two pillars of adequacy, automatic enrolment now covering 9 in 10 eligible employees and the state pension, have been successful, there is significant undersaving. As a result, around 15 million people are currently undersaving for retirement, increasing to 19 million without intervention. The issue is most acute for low and middle earners, the self-employed and women.
As the press release accompanying the report observes:
- “Low and middle earners are most at risk, with around half saving only at minimum Automatic Enrolment levels with little else to fall back on.
- 45% of working-age adults – around 18 million people – are not saving into a pension at all, despite nearly half of them being in work.
- Where employers are contributing about the statutory minimum this is largely benefiting higher earners.
- Just 4% – one in 25 – of wholly self-employed workers are saving for retirement, and it’s even lower among younger self-employed people.
- On current trends around 3 in 10 private pension pots are accessed at the earliest possible opportunity with half of all pots taken out in full. Nearly half of these are spent on large expenses like a car, holiday or renovations.”
Likely direction of travel
The Commission suggests that retirement adequacy may need to be measured differently, with a hybrid metric combining replacement rates for middle earners with a basic adequacy benchmark for lower earners. It also points to possible changes to automatic enrolment, further action to close participation gaps, particularly for the self-employed, and stronger defaults or “guardrails” to help people make better decisions when accessing savings in retirement.
Comment
This is an interim, analytic report rather than a package of final recommendations, but it gives a clear indication of the Commission’s thinking ahead of its final report in 2027. The message is that the current system has strong foundations, but adequacy, participation and decumulation are now central issues and further reform is likely to be needed. Any significant changes are likely to require consultation, notice and phased implementation.
TPR
New CDC code of practice
On 29 April 2026, TPR’s new draft CDC code of practice was laid before Parliament. It is subject to the statutory 40-day negative resolution period before it can come into force and is expected to do so in October 2026. We reported back in October 2025 on the expansion of the CDC regime from single and connected employer CDC schemes to unconnected multiple employer whole-life CDC schemes and at retirement (decumulation) CDC provision. Decumulation CDC is still in the early stages of development, but it could be as early as the start of 2027 when we will see the first operating multi-employer CDC schemes. TPR’s response to its CDC consultation can be accessed here and the DWP’s explanatory memorandum to the code here.
TPR consultation on its five-year corporate strategy
TPR has launched a consultation on its proposed corporate strategy for 2026–2031, setting out how it plans to regulate and influence the workplace pensions system over the next five years.
The strategy is outcomes focused and reflective of both ongoing structural reforms, including the Pension Schemes Act 2026 and the work of the Pensions Commission, and a more system wide regulatory approach, including closer collaboration with government and other regulators.
TPR’s vision is for people to achieve a sustainable retirement income within a system that delivers security and long term value, supported by a mission to protect members’ savings, strengthen the pensions system and enable innovation in members’ interests. To deliver this, the strategy is built around six long term outcomes covering benefit security, value for money, fairness, effective governance, a resilient market that supports growth, and a more joined up pensions journey from saving through to decumulation.
AI plan details expectations for trustees ahead of guidance expected later this year
On 20 May 2026, TPR set out its expectations for schemes on artificial intelligence (AI) in its AI plan ahead of more detailed guidance expected later this year.
TPR’s central message is that AI can improve member outcomes, but governance and accountability must keep pace to manage the associated and emerging risks which include AI-fraud, cyber-attacks, bias and inappropriate member reliance on AI for financial matters.
Trustees retain responsibility for the use of AI on their schemes even if activities are delegated to third party service providers. TPR’s AI expectations for schemes are based upon core effective governance principles as follows.
- Governance and oversight: have clear governance structures for AI use, understand how AI is being used and obtain assurance about third party controls.
- Testing, monitoring and assurance: carry out robust testing and implement appropriate ongoing monitoring and assurance processes.
- Risk management: identify, assess and mitigate risks, using suitable controls.
- Fraud and member protection: be aware of AI-related scam methods and respond appropriately.
- Data strategy: have a ‘clear’ data strategy, understand how AI is used in relation to data, and ensure the quality of data.
- Professional advice: obtain professional advice when considering or adopting AI.
TPR’s AI plan also outlines TPR’s AI approach and workplan to AI – its internal approach to AI guides how it regulates schemes and its ‘workplan’ includes strengthening scheme governance, improving data, supporting responsible innovation and using AI internally to improve its regulatory capabilities.
FRC issues finalised Virgin Media legislative remedy guidance for actuaries
The Financial Reporting Council has published finalised guidance for scheme actuaries on how they should approach providing retrospective confirmation of a potentially remediable alteration under the Virgin Media legislative remedy contained in the Pension Schemes Act 2026. The final version includes “minor amendments to wording and references to ensure clarity and alignment with the enacted legislation”. Our article detailing the draft guidance can be accessed here.