The government has outlined an indicative timeline for the next five years of pension reform, confirming that consultations and regulations for many of the initiatives included in the Pension Schemes Bill won’t be launched until 2027 at the earliest.

The government explained that the timeline for implementation of measures affecting defined contribution (DC) schemes was driven principally by the 2030 date for the minimum size requirement, which the government described as a "watershed date" for the vision for the DC market of the future to be in place.

It is also based on the assumption that the bill will receive Royal Assent in 2026, with the government having to wait until this point to consult on regulations being made under powers in the bill.

Work on initiatives not included in the Pension Schemes Bill is set to continue sooner, however, as the government confirmed that it plans to lay regulations to extend collective DC (CDC) to multi-employer schemes in autumn, which will come into force in 2026.

Indicative timings revealed...

The first step on the DC roadmap is for the Financial Conduct Authority’s (FCA) targeted support rules to come into place (2026), followed by the guided retirement regulations and rules process and the value for money (VFM) regulations process in 2026/27.

Master trusts would then be expected to start complying with the guided retirement duty from early 2027, with SETs and group personal pensions (GPP) to follow in early 2028.

2028 would also see the first step towards the contractual override and internal default consolidation, as well as the first publication of VFM data and the first VFM assessment.

As predicted by some industry experts, small pots work has been pushed slightly later in the timeline, with the small pots regulations process expected to take place in 2027/28, with small pots consolidators set to be able to apply to the scheme from late 2028, before selection in 2029.

The government explained that the implementation of the small pots consolidation solution is purposefully designed to fully come into force once the market of a smaller number of megafunds is in place, with the implementation of the multiple default consolidator simplified by the move to a smaller number of schemes.

"Policy and delivery work will be finalised over the coming years, but the timing of requiring the movement of small pots is such as to allow a ‘cooling off period’ before the duties on schemes are ‘switched on’ to avoid schemes being required to move deferred small pots earlier than having to move other pots should they be on track to consolidate or merge with another scheme," it explained.

The government also outlined a roadmap for the upcoming defined benefit (DB) reforms, which confirmed that the first issue to be consulted on would be superfunds regulation and DB surplus flexibility regulations, with the intention for regulations for both of these to be laid in early 2027, with surplus flexibilities guidance and regulations to follow shortly after this.

However, the government roadmap suggested that while surplus flexibilities regulations could come into force by 2027, the permanent regime for DB superfunds will not come into force until 2028.

Commenting on the roadmap, Pensions Minister, Torsten Bell, said: "The stakes are high. The quality of our pension system determines our living standards through what we all hope are decades in retirement. But it also underpins our wider economy as one of the largest domestic pools of capital.

"Governments are like people in one important way: they can easily put off thinking about pensions until it is too late.

"We must not do that, and we are not doing that. I know the task is to finish the job – to celebrate that people are saving something, but recognise our job must go beyond that: to build a pension system. This roadmap helps chart the course."

Industry reacts

Industry experts have broadly welcomed the roadmap, suggesting that it will provide much needed clarity and certainty on the sequencing of the upcoming reforms.

However, there has been some disappointment around the expected timings, as LCP co-head of consolidation, Laura Amin, warned that "the expected date of 2028 for the [superfund] regulations to be fully up and running will likely be frustrating for current participants".

Adding to this, Hymans Robertson head of corporate DB endgame strategy, Sachin Patel, noted that "the government’s roadmap suggests it will take some time - until the end of 2027 - before the surplus regulations and guidance will come into force".

Indeed, Squire Patton Boggs head of pensions practice, Matthew Giles also suggested that the 2027 date for DB surplus changes is "probably a bit later in the day than many were anticipating”.

However, speaking to press after the bill was published, Pensions Minister, Torsten Bell, argued that some schemes are already in a position where they can start preparing in anticipation of the final regulations.

"Some schemes are already in the position where they can act if they wish to now, but others will have time to go through their own processes and to think ahead of that final regime coming into place," he explained.

"So it's not like we're talking about nothing happens until the final legal processes is complete.

"If trustees have got a clear sight of what we're aiming to provide for them over the next three years, that's a big improvement on what they're used to dealing with....which means they can get on with all their internal processes, even if they are one of the schemes that doesn't currently have the ability to act until we've until we've legislated."

This sentiment has also been seen in the industry, as Independent Governance Group head of policy and external affairs, Lou Davey, said: "The sheer number of reforms inevitably means some measures won’t be delivered as soon as we would hope, but clearly everything can’t be done all at once. We at least have some clarity on the order, which enables the industry to plan.”

However, there have also been concerns that the pace could be too quick, as
Aegon pensions director, Steven Cameron, said that "perhaps the most surprising date on the timetable is that master trusts will have to start complying with guided retirement solutions in 2027, with GPPs a year later".

"Designing and implementing appropriate default retirement solutions for non-engaged workplace members will be hugely challenging," he stated.

“We do hope the government keeps an open mind on the roadmap dates, and continues to monitor progression – while we understand the Government’s desire for speed, it’s far more important to the millions of pension savers that the changes are ‘done right’.”

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