2025 set to be a ’pivotal’ year for UK pensions

09 January 2025

Retirement Line’s Mark Ormston believes that 2025 is shaping up to be a ‘pivotal’ year for pensions - and looks at the main changes ahead in an article for FT Adviser.

In his FT Adviser article, Mark (director of propositions and corporate partnerships) says that 2025 is looking “rather busy” and “for me at least, exciting”. He continues: “It has the potential to be a year of significant change and adaptation for the pensions industry.” 

Mark lists and summarises pensions changes and initiatives being driven by key UK regulators and government departments:  

Financial Conduct Authority

Mark starts by looking at the work of the Financial Conduct Authority (FCA). These include a new regime to provide targeted support to pension savers. Mark explains that the exact form and scope of the support are still being finalised. However, it is expected to significantly impact the way pension providers and financial advisers interact with consumers. 

The FCA is also proposing changes designed to enhance consumer understanding of their pensions. This includes calling for improved accuracy and clarity of the projections, tools and models that advisers and providers use. 

Mark also mentions continuing work around Consumer Duty. This came into effect in July 2023 and includes the requirement for companies to prioritise good customer outcomes. It requires pension products and services to be clear, fair and value for money.

Department for Work and Pensions

The Pensions Dashboards Programme is progressing, with the first cohort of pension providers expected to connect to the dashboards by April 2025. 

Mark says that the dashboards will be a game-changer. “If it lives up to the promise, it will provide a clearer view of pension savings across multiple providers,” he says. “As a result, it should go some way to meeting its goal of empowering consumers.”

Also from the DWP, a Pensions Investment Review is underway and may lead to changes to the way that millions of people’s pension savings are invested. However, the government has postponed its separate review of pension outcomes. Mark says: “It would be helpful if we got a date for this piece of work — even if the date was for 2026.”

HM Treasury

The main topic of interest in terms of pensions and tax is the upcoming change to inheritance tax rules. As we reported in November, pensions will be brought into inheritance tax from 6 April 2027. 

Mark says that he ‘shudders to think’ about the process, reporting and system changes required to implement the change. He also believes that many pension savers will revisit their retirement and inheritance plans in 2025, in light of unused pension funds and death benefits being included in their estate for inheritance tax purposes.

He also mentions the 25% charge applicable to qualifying overseas pension scheme transfers to non-EU countries. This will extend to transfers to EU countries from 6 April 2025.

The Pensions Regulator 

There is a continuing drive towards consolidation of pension schemes, which aims to improve investment outcomes. There are proposals to increase the minimum size of defined contribution pension scheme default funds and limit the number of funds offered. 

Other work from the Pensions Regulator includes improving its oversight of defined benefit pension schemes. There will also be greater emphasis placed on climate change and environmental, social and governance factors in pension scheme investments. 

Not forgetting annuities…

Mark finishes his article with a word on annuities: “Annuity rates are still relatively high, and they look likely to remain competitive during 2025. Coupling this with the recent Budget inheritance tax changes, 2025 may be another busy year for the annuity market.”