After two weeks of back and forth between the House of Lords and the House of Commons, where the two houses debated the final points of the Pension Schemes Bill, the Bill received Royal Assent on 29 April, officially becoming a law.
The legislation is expected to accelerate consolidation across both defined benefit (DB) and defined contribution (DC) provision, alongside reforms spanning governance, investment strategy and retirement adequacy.
A central and controversial element is the reserve power (also known as ‘mandation’ power), which would allow the government to mandate minimum asset allocation targets for DC default funds if voluntary market outcomes are deemed insufficient.
Following extensive debate between the House of Commons and the House of Lords, the provision has been significantly diluted.
The power is now capped at 10% of default fund assets and 5% of UK-based assets, with a sunset clause brought forward from 2035 to 2032. It also includes an exemption where forced allocation would result in material financial detriment to members.
Tougher insurer capital rules
The Prudential Regulation Authority (PRA) has been closely monitoring funded reinsurance over the last few years, with concerns that rapid growth poses potential systemic risks to the UK insurance sector.
In 2025, the PRA carried out its first stress test of the sector’s exposure to reinsurer failure. It concluded that insurers would remain broadly resilient even if they had to “recapture” £12.3bn of pension assets, roughly half of what had been transferred to reinsurers.
However, the PRA warned that continued growth in funded reinsurance could pose a greater threat to insurers’ solvency positions over time.
In a latest move, PRA has proposed tightening regulations on these arrangements, aiming to increase capital requirements for funded reinsurance from the current 2–4% of annuity liabilities to around 10%.
The PRA has stated it does not intend to ban funded reinsurance, acknowledging it is a valuable source of long-term capital, but it wants to ensure it is used in a “prudent manner”. The new, tougher rules are proposed to take effect for new transactions from October 1, 2026.
£480bn powerhouse
Standard Life acquired Aegon UK earlier this month for £2bn, with the deal expected to close by the end of 2026, creating one of the UK’s largest retirement savings and income businesses. Subject to regulatory approval, the combined entity will have around £480bn in assets under administration and 16 million customers.
While it is “business as usual” for current customers, with policies and investments remaining in place, the deal boosts its end-to-end DC proposition, strengthening accumulation and retirement offerings alongside technology-enabled administration and customer service.
£450m direct lending mandate
In April, the UK’s largest workplace pension scheme, NEST, appointed Crescent Capital Group to a £450m direct lending mandate. The evergreen, open-ended mandate focuses on investing in secured, first-priority loans for UK middle-market companies.
The investment supports NEST’s long-term strategy to diversify its portfolio through well-structured private credit opportunities and its ambition to allocate 30% of its AUM to private markets by 2030.
The shift towards private markets is intended to bolster long-term returns for members of the scheme.
Items to note:
- The Impact Investor Forum 2026 is taking place on 14 May at The Conduit London.
Pamela Kokoszka
UK Correspondent
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