Minister for Pensions (): We are taking action to
ensure the strong regulatory framework for Defined Benefit
pensions remains effective as innovation develops, to manage
future risks and protect member benefits
On 4 December 2025, a novel use of existing legislation led to an
Asset Manager assuming responsibility for the liabilities and the
assets of another employer's defined benefit (DB) pension scheme.
This Government has since delivered the landmark Pension Schemes
Act 2026 (the Act), introducing major reforms to UK occupational
pensions, consolidating our fragmented pensions system into
larger, better run, more secure schemes.
We want to encourage innovation that has the potential to benefit
scheme members throughout the pension system and need to ensure
the right legislative guard rails are in place for this to happen
safely.
Flexible Apportionment Arrangements (FAA), the legislative
mechanism used in this transaction, were introduced in 2012. They
were designed to ensure that corporate restructurings, mergers,
and sales do not cause employer insolvency events when there is
an appropriate sponsor who can support the scheme. Whilst this
transaction complied with the existing FAA mechanism it did so in
a way not anticipated when the mechanism was introduced.
We therefore intend to review this area of legislation to ensure
the regulatory standards and safeguards evolve and keep pace with
the innovation we are seeing in the pension market. This is to
protect members and the Pension Protection Fund, which is there
to protect people's pensions in the event of an employer
insolvency.
The DB superfunds framework set out in the Act reflects the fact
that superfunds operate schemes on a commercial basis and is
designed to ensure that the interests of commercial providers are
appropriately aligned with those of scheme members. This contrast
highlights the importance of considering whether additional
safeguards are required where other mechanisms, such as FAAs, are
used in ways that similarly involve the commercial operation of
DB pension schemes. We will therefore consult in due course on
whether and how existing FAA regulations could be strengthened.
Where providers are looking to run schemes for profit, this can
work in scheme members interests but regulatory standards and
safeguards must evolve to match the new risks this creates.
