LCP’s five key areas of focus for employers and trustees are:
1. Pension Schemes Bill
Royal Assent for the Pension Schemes Bill this year will introduce value-for-money (VfM) requirements, small-pot consolidation and post-retirement defaults. LCP is advising trustees to start benchmarking their schemes against the likely VfM metrics now to avoid surprises later. Trustee boards should also begin building familiarity with the post-retirement solutions emerging in the market, as 2028 will come around quickly and most boards will need to dedicate significant time to understanding the available options.
2. Inheritance Tax (IHT) on pensions
With unused DC pension pots expected to be included in IHT calculations from April 2027, LCP encourages this change to be communicated well in advance. As it will impact estate planning, reviewing retirement and inheritance strategies will be crucial, especially for those with large pots. In particular, employers and trustees should check with their providers to understand how members will be supported through these changes.
3. Salary sacrifice
From April 2029, NIC relief on salary sacrifice pension contributions will be capped at £2,000 per year. While there is still time, experts at LCP urge that planning is key, including considering whether the benefit design for schemes continues to be the most appropriate. This will allow time to consider alternative benefit structures or education campaigns to maintain engagement when the cap bites, and to manage this cost effectively.
4. Guided retirement support
As DC pots grow, schemes will face increasing pressure to support members at retirement. New FCA rules on targeted guidance from April 2026, alongside the Bill’s decumulation duties, will require schemes to play a more active role in helping members navigate their choices. LCP sees benefits in investing in digital tools and personalised guidance, whether in-house or through a provider partnership, to help members make informed decisions without overwhelming them.
5. ESG and investment trends
Despite ESG pushback from some geographies, LCP is seeing UK DC schemes doubling down on climate-related investing, with a continued focus on reducing carbon exposure. Alongside this, the experts expect more private market allocations, particularly from master trusts and providers, and greater use of pooled assets as consolidation accelerates, and continued conversations about concentration risk in the US equity market.
Lydia Fearn, Partner in LCP’s DC practice, said: “The DC pensions market is facing a period of significant change, and trustees and employers have a real opportunity to get ahead of what’s coming. Scale, support and sustainability will define the next phase of the market, and taking action now on investment design, value for money, and upcoming tax changes will help schemes respond effectively to new regulatory demands and deliver better outcomes for members.”
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