Starting the year strong: a magnificent seven issues to plan for in 2026

As we step into a new year, many of us embrace the familiar tradition of setting New Year’s resolutions – commitments to plan ahead and get more organised. For pension scheme trustees, this sentiment could not be more timely. The legal and regulatory landscape continues to evolve, with the next few years bringing changes which will require the kind of focus and forward planning that will challenge even the most determined goal-setter. 

This blog outlines seven magnificent pension developments to have on your radar. Starting the New Year with renewed focus (and this handy checklist) will help ensure you and your scheme are well equipped for the year ahead.

1. DB funding and strategy requirements – upcoming valuations 

   The next valuations will be the first under the new statutory funding regime and TPR’s DB Funding Code. Trustees will need to have a funding and investment strategy (FIS) which focuses on the long-term funding objective of the scheme and how it will be achieved.  This must be set out in a written statement of strategy (SoS) which will also need to consider risk in the context of the employer covenant. Trustees will need to engage with the sponsoring employer on the content and consider what their endgame is.   

   Impact: trustees should begin engaging with the scheme actuary, legal advisers and sponsoring employers to negotiate and agree valuation within the required timeframe.  Keep an eye out for changes in approach from TPR based on experience from the first round of valuations. Timing: finalise valuation and FIS within 15 months of valuation date and then submit SoS to TPR as soon as reasonably practicable. Risk: directions or penalty notices from TPR or intervention in funding process.

2. Return of ongoing surplus

   At present, surplus in ongoing DB schemes can only be released to sponsoring employers if the scheme is fully funded on a buy-out basis, the rules permit it, the trustees passed a resolution preserving the power before 6 April 2016 and they are satisfied it is in members’ interests. 

   The Pension Schemes Bill will give trustees a statutory power to amend rules to permit ongoing surplus extraction, as well as removing the requirements for a pre-April 2016 resolution and for a refund to be in members’ interests. It is also anticipated that regulations will reduce the funding threshold to a low dependency basis. TPR has published guidance which sets out considerations when using surplus and trustees and sponsors should take this into consideration as part of any thinking/decision-making on surplus. 

   Impact: increased likelihood of requests from employers for trustees to amend rules to allow for surplus extraction. Timing: relevant legislation expected to come into force in 2027. Risk: 25% tax charge on surplus amount; potential for member complaints.

3. Virgin Media legislative solution 

   The Pension Schemes Bill includes amendments aimed at addressing the issues which have arisen as a result of the decision in the Virgin Media Limited v NTL Pensions Trustees II Limited. The proposed changes would allow trustees to obtain retrospective actuarial confirmations for past in-scope amendments. For more detail on the amendments in scope and the remediation process, see our blog “Virgin Media – A Solution At Last?”.  Trustees and sponsors should also look out for the upcoming judgement in Verity Trustees v Woods which will be relevant when considering the level of information required by an actuary in order to provide a confirmation and if confirmation is needed. 

   Impact: trustees should consider asking advisers to conduct a review of past amendments to check compliance and assess what action is needed. Timing: Pension Schemes Bill expected to come into force in first half of 2026. Decision in Verity Trustees v Woods awaited. Risk: will depend on nature of scheme amendments.

4. Inheritance tax

   The Government continues to refine its proposals to impose inheritance tax (IHT) on amounts payable following a member’s death.  IHT will apply to unused DC funds and certain death benefits including lump sums on a pensioner’s death (e.g. within five years of retirement) and refunds of contributions on the death of a deferred member. It will not apply to death‑in‑service benefits, pensions paid to spouses or dependants directly from a scheme and payments from unregistered schemes.  

   There will be tight timelines for schemes to tell personal representatives about the value of any benefits payable on a member’s death and once decided, who the beneficiaries are.  If the IHT is more than £1,000, beneficiaries can instruct the scheme administrator to pay the IHT on their behalf and they will have 35 days to do so. 

   Impact: there will need to be a robust administration system in place and channels allowing for clear communication between scheme administrators and personal representatives.   Timing: changes come into force on 6 April 2027. Risk: beneficiary complaints and scheme administrators can become jointly liable for any IHT in some cases.

5. Pension Dashboards

   Many schemes have already connected to the Pensions Dashboards ecosystem, ahead of the connection long-stop deadline of 31 October 2026.  Those that haven’t need to make sure that they are on track to meet this deadline. 

   Going forward, trustees will need to comply with ongoing technical and governance obligations including ensuring that they remain connected 99.5% of the time and maintain audit trails for connection decisions, data matching policies and risk management.  They also need to ensure there is sufficient administrator resource to deal with any increase in member queries once the dashboards go live (although there is currently no date for this).

   Impact: ongoing duties even after connection to dashboard ecosystem. Timing: ongoing but note connection long-stop date of 31 October 2026. Risk: enforcement action by TPR, data hack and/or cyber risk and member complaints if information supplied incorrectly.

6. Governance 

   There are several governance-related issues to be aware of going into 2026: 

   Own risk assessment: Trustees of schemes with 100 or more members must complete an ORA as part of their obligations to maintain an effective system of governance. Its purpose is to evaluate the effectiveness of risk management (including risks to members, ESG risks and conflicts).

   Identity verification: From 18 November 2025, company directors and persons with significant control must verify their identity. Verification can be done online, at the Post Office or via an authorised corporate service provider.

   Data protection: The Data (Use and Access) Act 2025 introduces changes to the existing data protection regime. In particular, it contains a requirement for controllers (including trustees) to have a complaints process in which they acknowledge complaints within 30 days and respond to them ‘without undue delay’. They must also “facilitate the making of complaints… by taking steps such as providing a complaint form which can be completed electronically…”

   Impact:   Consider actions needed to comply with ORA and identity verification requirements. Watch out for implementation of the relevant provisions in relation to the data protection complaints requirements and consider what is needed. Timing:   An ORA must be completed within 12 months of the end of the first scheme year after TPR’s General Code of Practice came into effect (March 2024).   Trustee directors to verify identity when filing next annual confirmation statement Risk: enforcement action, penalties and reputational damage.  Failure to comply with the identity requirements is also a potentially criminal offence and can result in a ban from acting as a director.

7. Trusteeship 

   The Government has released a consultation on trusteeship, governance and administration which seeks input on a wide range of topics including trustee appointment, the roles of professional and lay trustees and mandatory minimum standards for scheme administrators. The consultation also outlines plans to explore whether it would be appropriate for TPR to set a higher standard (enshrined in statute) for professional trustees.

   Impact: will depend on what proposals finally emerge. Timing: consultation runs until 6 March 2026. Risk: there is potential for increased regulatory scrutiny for trustees and requirements to meet higher governance and accreditation standards.