With innovation and change being current buzz words in the UK pensions industry, we explore five foundational topics set to mark out 2026 as a key year for the future evolution of UK pensions.
01
Systemic improvements in DB funding over the last few years, and new thinking to deliver value to members and sponsors, have brought surpluses onto the agenda of stakeholders and policymakers alike. Even closed DB schemes are being viewed by sponsors as an 'asset' rather than a 'liability', comparable to the interest from insurers and superfunds in such schemes.
In the lead up to prior government consultations, WTW foresaw the potential opportunities from DB surpluses. We advocated six clear policy changes, ahead of the Chancellors' Mansion House Speech in July 2023, that would give stakeholders sufficient options to enable surplus sharing agreements to be reached rather than solely being incentivised to transfer risk as fast as possible. Most of these policy changes have now been enacted or announced.
| Reduce tax on refunds from 35% to 25% | Implemented – Took effect from 6 April 2024 |
|---|---|
| More readily allow ongoing refunds of surplus referenced to low dependency not solvency | In progress – The Pension Schemes Bill removes the requirement to be fully funded on a solvency basis and the Government has said it is minded to use a low dependency funding basis measure without adjustment. |
| Ability to pay lump sums to members | In progress – Announced in Budget 2025 |
| Avoid new funding regulations triggering excessive de-risking | Implemented – The final Code of Practice on scheme funding from the Pensions Regulator reflected this. |
| Create a legislative mechanism to transfer DB surpluses to DC schemes | Not implemented – Such transfers are not as straightforward as they should be but the changes to the tax position coupled with allowing refunds of surplus help to achieve this. |
| Revisit TPR statutory objectives | Not implemented – Not changed but there has been a noticeable change in tone from TPR that is demonstrably more supportive of run on and open schemes. |
In Spring 2026, the Pension Schemes Bill should receive Royal Assent, paving the way for legislation in 2027 that will enable surplus sharing agreements to be reached on any scheme where the stakeholders consider it appropriate to do so.
That new legislation is designed to overcome technical legal barriers that prevent certain ongoing schemes making payments from surplus to employers. However, for schemes where those barriers do not exist, there is already an opportunity for surplus sharing agreements to be struck and so, with a significant proportion of schemes now enjoying a solvency surplus, we expect more agreements around run-on and use of surplus to be reached during 2026 before that legislation comes into effect.
02
Through the combination of widespread surpluses, new funding legislation focused on long-term plans, new entrants (and consolidation) in the risk transfer market and evolving legislation, the stars have aligned for significant innovation in DB 'endgame' options. This is causing trustees and sponsors to seriously reconsider the plans for their schemes, with many moving to a different strategy than previously expected. We expect this trend to continue into 2026.
The nascent superfund market is an obvious area for further innovation. With the Pensions Schemes Bill leading to certainty over a permanent regulatory regime for superfunds, we anticipate several new superfunds to be launched, increasing competition and bringing new offerings. New superfunds are likely to offer 'value share' models, allowing members to receive greater benefits. There may also be more opportunities for smaller schemes beyond segregated superfund sections into comingled offerings from new superfund providers.
We also expect the market for superfunds to widen because of the combination of new surplus sharing legislation and changes to the superfund gateway tests. For example, even schemes overfunded on a buyout basis today might consider superfunds an attractive option alongside granting higher member benefits, when previously such options may have been dismissed.
Where endgames are concerned, we are sure to see more unique deals, including innovative use of pension captives and value-share structures either to sponsors and/or members. Transactions like that between Aberdeen and Stagecoach demonstrates the appetite and scope for bespoke solutions, and the Pensions Regulator has continued to encourage innovation, alongside enhanced benefits, provided the solutions demonstrate appropriate guardrails regarding member benefit security. Its innovation service portal indicates its willingness to consider bespoke solutions.
However, such alternative solutions will not be right for all, and so we still expect traditional buy-in and buyouts will continue apace with aggregate deals in excess of £50bn in 2026, driven by changes in providers, flexibility on working with more complex benefit structures and attractive market pricing, despite the background of very low credit spreads that currently persists.
Our recent survey of over 250 schemes suggests that scheme size will be an influential factor on the ultimate strategy, with insurance solutions continuing to dominate the future strategy for the majority of schemes below £250m and run-on strategies being relatively more attractive for larger schemes.
03
During 2026, we expect the significant proposals set out within the Pensions Schemes Bill affecting DC pension savings to start having an impact on the market.
With ever more individuals relying on DC savings in retirement, improving how savers access their DC pensions through income options is a key area and we expect Guided Retirement (default decumulation) solutions to be a focal point during 2026 so that alongside annuities and drawdown, other innovative options are available, such as different styles of "flex then fix".
One solution that is currently not available is Retirement Collective Defined Contribution (CDC) while we await final legislation. We think it is important for Retirement CDC to be available as soon as possible, and particularly in time for when pension schemes will be putting in place Guided Retirement solutions (2027/28). We hope that the industry's voice calling for this is heard.
The Pensions Schemes Bill also introduced a new value for members framework as well as scale requirements on multi-employer schemes, such as master trusts. While pushing for better value for pension savers is crucial, there is a risk that these additional burdens on pension schemes and providers could divert resources away from business as usual activity and innovation. We are likely to begin seeing the impact of this during 2026, although it may be more keenly felt in future years.
04
Big changes are on the horizon this year for pension savers themselves.
Pensions Dashboards are expected to go live to the public in late 2026 (potentially from 31 October 2026) and the DWP has committed to giving at least six months' notice before launch. Savers will initially be able to access the MoneyHelper Dashboard, with other commercial Dashboards likely to follow later.
Other countries that have introduced dashboards have seen substantial initial engagement. The launch in the UK is likely to generate significant media coverage, and both industry and government recognise that there could be a period where administration resources are under significant pressure.
To avoid impacting business-as-usual functions, schemes should minimise the number of potential member queries and 'on demand' calculations. Ensuring that members can self-serve through the scheme's website as far as possible (e.g. automated password resets) will mean they only contact the administrator when absolutely necessary. Therefore, preparation is critical.
Data quality improvements and preparing for calculations, including those that would need to be done 'on demand', should already be under way. Dashboards will link directly to each scheme's website, so those managing schemes should think carefully about what members will see and need as part of the end-to-end experience. At the very least, this should include a clear Dashboard explainer and FAQs on the homepage. Adding educational content and planning tools could make a big difference that improves the member experience and reduces the risk of overwhelm for pensions teams and administrators.
05
With the pensions industry moving towards a smaller number of larger pension schemes, the DWP's current consultation (closing 5 March) about trusteeship and governance marks a well-timed 'stock take' about how the pensions system should be governed.
The consultation recognises that delivering good member outcomes and maintaining trust will be a function of high standards of governance and administration as well as maintaining a good connection with members. With professional trustees increasingly responsible for the stewardship of retirement savings, the consultation seeks views on the standards, as well as the checks and balances, that ought to be in place. The responses to the consultation this year, coupled with the views of the Pensions Regulator, will shape both the system itself as well as the way in which it will be regulated.
The UK pensions landscape is on the cusp of significant transformation and 2026 looks set to be a more action-oriented year for implementing innovative solutions, building on the foundations of the last few years and making real progress towards delivering greater value to all stakeholders.
