7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

HMRC publishes pensions schemes newsletter 173

HMRC published its latest pensions schemes newsletter on 25 September 2025. The key updates include:

  • Returning tax-free lump sums: HMRC issued a statement in parallel with the FCA which sets out the interaction between FCA cancellation rights and the tax treatment of tax-free lump sums. If an action has resulted in a tax consequence, and an attempt is made to reverse the action, normally the resulting tax consequences cannot be reversed. However, where a transaction falls within the FCA rules that require a cancellation right to be provided then the tax consequences can be reversed, for example the cancellation within 30 days of a contract to transfer a pension. This reversal is limited to actions that are expressly referred to in the FCA rules. A contract allowing a person to take a PCLS or an UFPLS is not a “cancellable contract” under the FCA rules so once these lump sums have been paid, the associated tax consequences (including the use of the individual’s lump sum allowance and lump sum death benefit allowance) cannot be undone, even if the payment is returned or cancellation rights are exercised. This does not prevent registered pension schemes from offering cancellation rights for the lump sum elements of cancellable contracts but where they choose to do so, it is essential that they ensure members are aware of the tax consequences if those rights are exercised.
  • Abolition of LTA: HMRC is preparing further minor technical amendments to the legislation concerning the abolition of the LTA. The changes are designed to clarify certain provisions, correct minor drafting inconsistencies and support smoother implementation. The aim is for the regulations to be made in early 2026. When introduced, they will have retrospective effect from 6 April 2024. There may be further minor changes following consultation with industry, which will take place later in 2025. The key amendments are intended to ensure:
    •  lump sums paid from an overseas pension scheme to a UK resident (that are equivalent to a lump sum paid from a registered pension scheme that would be tax-free or have a tax-free element) continue to be treated similarly to such payments
    • the valuation of a member’s relevant crystallised pension rights for trivial commutation lump sums is consistent with the rules in place prior to April 2024
    • the calculation for individuals with scheme-specific pension commencement lump sum operates as intended
    • provisions are put in place for stand-alone lump sum values to be transferred to a receiving scheme, and
    • the treatment of enhancement factors is consistent with the rules in place prior to April 2024.

PPF announces zero levy

On 23 September 2025, the PPF announced that it will be not be charging a conventional PPF levy for the year 2025-26. This move is expected to save DB schemes and their sponsoring employers £45m.

Measures included in the Pension Schemes Bill have given the PPF “greater flexibility”, enabling a move to a zero levy while preserving the PPF’s ability to reinstate the charge in future if needed. An announcement has been made now to “provide timely clarity for DB schemes and their sponsors, enabling them to better make any associated financial decisions this year”.

FCA consults on changes to its handbook

This summer, the FCA consulted on its proposed regulatory framework for targeted support. Our response can be viewed here.

Targeted support is aimed at the gap between existing guidance-based services and more bespoke advice and would enable authorised firms to make suggestions that have been developed for a group of consumers who share similar circumstances and characteristics.

On 26 September 2025, the FCA published a consultation paper on additional changes to the FCA Handbook to ensure that its targeted support proposals work effectively with existing requirements.

The deadline for responses is 17 October 2025.