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The New Pension Rules You Need to Know in 2025
Vicky Parry
3rd Nov 2025
What’s changing in UK pensions — and what you should do about it
Retirement planning already feels like threading a needle in shifting conditions. But 2025 brings a fresh wave of pension changes in the UK — not minor tweaks, but reforms with real impact. If you’re saving into a workplace pension, personal pension, or simply relying on the State Pension, these updates could affect your strategy (or your wallet). Let’s walk through the biggest changes, what they mean for you, and how you can respond—and thrive.
What’s Driving the Change?
Before diving into the rules, it helps to understand why the government is acting now:
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The complexity and fragmentation in the pensions system have become a drag. Smaller pension pots, multiple schemes per person, and “orphaned” inactive pots are viewed as inefficiencies.
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There is political and economic pressure to unlock capital from pension schemes (especially surplus in Defined Benefit schemes) to spur growth and investment.
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Regulatory emphasis is shifting toward value for money, transparency, consolidation, and pool-based investment models that can compete globally.
These pressures underlie several of the reforms in motion.
Below are the most important pension changes in or around 2025. (Some are already in effect; others are proposed or in legislation.)
Key 2025 Pension Rule Changes & Proposals
Below are the most important pension changes in or around 2025. (Some are already in effect; others are proposed or in legislation.)
| Reform / Change | Status / Timing | What It Does | Who It Affects | What You Should Do |
|---|---|---|---|---|
| Lowering evidence threshold for Personal Pension Relief | From 1 September 2025 | The government will reduce the threshold for requiring evidence when claiming higher- or additional-rate tax relief through your PAYE tax code. Also, telephone claims will no longer be accepted; claims must be made online or by letter. (GOV.UK) | Anyone with a private pension claiming tax relief | Keep documentation ready (payslips, tax returns) and shift to digital or written claims |
| Deadline extension for “scheme pays” in public service pensions remedy | Extended to 6 July 2027 | Members who missed the original scheme-pays deadline can now make a late scheme-pays election under remedy rules; previously, the deadline was 6 July 2025. (GOV.UK) | Public service workers affected by remedy adjustments | Check whether you were impacted; make a scheme-pays election if eligible |
| Pensions Increase (Review) Order 2025 | In force | This order sets the annual rate used to increase pensions in payment (i.e. inflation uprating) for 2025. (Legislation.gov.uk) | Pensioners drawing an occupational or public scheme pension | Understand how much your income will rise and tax impact |
| Pension Schemes Bill 2024–25 | Under parliamentary process (expected passage in 2026) (House of Commons Library) | A major legislative vehicle with multiple reforms (see below) | DB and DC scheme members; pension scheme trustees; employers | Monitor developments; adjust longer‑term planning accordingly |
| Smaller DC schemes merging into ‘megafunds’ | By 2030 | The government has signalled it will require smaller Defined Contribution schemes to consolidate into large funds of a minimum size (e.g. £25bn) to achieve economies of scale. (Reuters) | DC savers, especially those in smaller employer schemes | Understand which fund your scheme may migrate into; question cost and performance |
| Increased transparency and value-for-money obligations for DC trustees | As part of Pension Schemes Bill | Trustees will be required to report on whether the scheme offers value for money, and to offer “guided retirement” options. (House of Commons Library) | DC pension members | Review your scheme’s annual report and compare with peers for cost/return |
| Unlocking surplus in DB schemes | Proposed | Under the new bill, well‑funded DB schemes may be able to share surplus funds with employers, subject to safeguards. (House of Commons Library) | DB scheme members, employers, trustees | Watch whether your scheme declares a distributable surplus; evaluate effect on scheme security |
| CDC (Collective Defined Contribution) expansion | Proposal / discussion | Encouraging collective DC schemes, which pool longevity risk across members, is part of the future roadmap. (Financial Times) | Employers, DC scheme members | Assess whether your scheme could adopt or migrate to CDC structure |
| State Pension “triple lock” and uprating rules | In 2025 | The State Pension was uprated by 4.1% in April 2025, in line with the triple lock (highest of inflation, earnings, or 2.5%) (standardlife.co.uk) | Future and current State Pension recipients | Monitor how much your pension increases and check whether your NI record is solid |
Deep Dive: The Pension Schemes Bill & Its Impacts
The Pension Schemes Bill 2024–25 is shaping up to be one of the most consequential pension reforms in a generation. According to the House of Commons Library briefing, the Bill includes a dozen policy measures. House of Commons Library Some of the most noteworthy are:
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Multi-employer DC consolidation
The Bill proposes consolidating multiple small DC schemes into “megafunds” or default consolidators. This would reduce redundancy, cut costs, and increase bargaining power in global markets. House of Commons Library -
Value for Money Reporting
Trustees of DC schemes will be required to publish clearer metrics demonstrating that their scheme represents good value for members—effectively benchmarking fees, performance, and administration. House of Commons Library+1 -
Scheme Transfers / Default Transfers
The Bill may permit contract-based providers to override a member’s contract and move them to default arrangements under certain conditions—if it is in the best interest of the member (with safeguards). House of Commons Library -
Guided Retirement Options
DC scheme trustees may be required to offer “default retirement products,” helping members make decisions at point of retirement. House of Commons Library+1 -
DB Superfunds Regime
The Bill would formalise permanent rules for DB “superfunds,” commercial consolidators of DB schemes, replacing interim arrangements. House of Commons Library -
Surplus Access to Employers
Where DB schemes are well-funded, the Bill allows surplus funds to be shared with sponsoring employers (subject to rules). House of Commons Library -
Ombudsman Powers and Complaints
The Pensions Ombudsman’s decisions will carry stronger legal weight in overpayment cases without needing a county court order. House of Commons Library
Because the Bill is still passing through Parliament, timings may slip, and certain clauses may be amended or dropped. The government has published a Workplace Pensions Roadmap that lays out indicative timings and sequencing. GOV.UK Assets It also emphasises that not all changes will take effect at once—some provisions may be phased.
What These Changes Mean for Pension Savers
Some of these reforms will affect you only indirectly (via scheme structure or trustees), but others may require action or change your strategy. Here’s what to watch for:
1. Funds You’re in May Change or Merge
If your scheme is small, your provider may be required to move you to a larger “default” consolidated fund or reorganise assets into a megafund. That could mean new investment managers, different risk profiles, or charges. Before any change, ask your scheme:
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What’s the default asset allocation?
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What are the fees?
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Are the guarantees or protections preserved?
2. More Visibility on Costs and Value
With greater reporting mandates, you’ll have more transparency. Use that to:
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Benchmark your fees (total expense ratio, administration, transaction costs) vs comparable schemes
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Compare with low‑cost alternatives (e.g. NEST, other large default funds)
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Flag underperforming schemes to your employer or trustees
3. New Claiming Procedures & Deadlines
From 1 September 2025, you’ll need more documentation to claim higher-rate pension tax relief. Also, deadlines for remedy elections may shift (e.g. scheme pays). Be proactive:
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Gather supporting documents (payslips, tax returns) in digital form
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Monitor deadlines for remedy or transfer elections
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Use online or letter-based channels (telephone claims will be disabled)
4. Potential Loss of Some Flexibility
If contract-based providers gain powers to override contracts, you may no longer always choose where your pot sits. The bright side is safeguards will be required, but vigilance will be necessary.
5. Risk & Complexity in DB Changes
If your pension is a defined benefit scheme, the reforms (surplus sharing, superfund consolidation) could shift risk dynamics:
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Trustees may accept more investment risk
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Surplus-sharing may appeal to employers, but ensuring the core pension promise remains protected is key
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If your DB scheme moves to a superfund, check its guarantees and regulatory oversight
6. Tax & Inheritance Planning
Rising incomes from uprated pensions, combined with changes to how pensions are taxed in death (if implemented in the future), could erode net wealth if not planned. (Though many proposals remain speculative.)
What You Should Do (Now & Going Forward)
Here’s a checklist to act on:
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Audit Your Pension Portfolio
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List all your pension pots (workplace, personal, previous jobs)
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Note fees, fund type (DC or DB), default asset allocations, and historic returns
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Understand Your Scheme’s Governance
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Read your scheme’s annual report or value-for-money disclosures
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Ask your trustee or administrator for scheme documentation and planned changes
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Stay on Top of Legislative Progress
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Track the Pension Schemes Bill through Parliament (House of Commons Library briefings are good) House of Commons Library
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Watch for scheme communications alerting you to forced transfers or consolidations
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Upgrade Your Documentation & Digital Readiness
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Ensure you retain payslips, tax returns, and documentation needed for relief claims
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Shift to digital or written claim channels (phone claims are being phased out)
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Compare Alternative Providers
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Investigate low-cost pension providers or platforms (e.g. SIPP providers, NEST)
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If your scheme’s costs or performance look weak, consider consolidation or directed transfers (if rules allow)
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Plan for Tax & Estate Impacts
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Use lifetime and annual allowances strategically (avoid surprises from tax charges)
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Consider review of pension death benefit rules and future inheritance tax implications
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Engage and Advocate
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As a member, you have rights. Ask your pension scheme trustee to explain changes, get disclosures, and assess the fairness of your treatment
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Join scheme member forums or consult independent financial advisers
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Why This Matters — Bigger Picture & Risks
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Scale and power matter: Consolidating into megafunds is aimed at unlocking lower costs, better investment options (e.g. global private markets), and improved efficiency. But it also concentrates risk and power.
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Transparency is overdue: On many legacy DC schemes, members had little insight into total charges, transaction costs, or net returns. The reforms aim to democratise information.
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Disruption risk: Any forced mergers or transfers bring administrative and investment risk. Poorly managed transitions could harm returns or cause confusion.
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Possibility of unintended consequences: If surplus funds are diverted to employers, or risk is shifted to members, pension security could suffer unless safeguards are strong.
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Tax & legislative uncertainty: Some changes, especially those around taxation and inheritance, are still proposals. Political shifts and consultations may alter outcomes.
Conclusion
2025 and the years immediately ahead look to be pivotal for UK pensions. What seemed like a steady system is entering a phase of disruption, consolidation, and redefinition. For savers, that means both challenges and opportunities.
Your best bet is to stay informed, demand clarity, and act early. Knowing your scheme inside-out, comparing alternatives, and keeping an eye on legislative updates will help you ride the wave rather than be swept away.
To know more about Pensions as an Investment then come and visit our up to date pensions guide here.
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