# Pension Schemes Act 2026, Section 49: FCA-regulated pension schemes: contractual override

Extent: E+W+S

(1) The Financial Services and Markets Act 2000 is amended as follows.
(2) After Part 7 insert—
“Part 7A
Unilateral changes to pension schemes
Pension schemes to which this Part applies
117A (1) This Part applies to a pension scheme—
(a) that is FCA-regulated, and
(b) in relation to which any of the following conditions is met.
(2) The conditions are—
(a) that the scheme is an auto-enrolment scheme;
(b) that the scheme is a workplace personal pension scheme that is not an auto-enrolment scheme;
(c) that the scheme is a pension scheme of a prescribed description.
(3) For the purposes of subsection (2)(a) and (b) a pension scheme is an “auto-enrolment scheme” if any individual is or at any time was an active member of the scheme in consequence of arrangements under section 3(2), 5(2) or 7(3) of the Pensions Act 2008 or section 3(2), 5(2) or 7(3) of the Pensions (No. 2) Act (Northern Ireland) 2008 (c. 13 (N.I.)) (arrangements for jobholder to become active member of automatic enrolment scheme).
(4) In subsection (3) “active member” means an active member within the meaning of Part 1 of the Pensions Act 2008 (see section 99 of that Act) or Part 1 of the Pensions (No. 2) Act (Northern Ireland) 2008 (c. 13 (N.I.)) (see section 78 of that Act).
(5) For the purposes of subsection (2)(b) a pension scheme is a “workplace personal pension scheme” if—
(a) the scheme is a personal pension scheme,
(b) direct payment arrangements exist, or have at any time existed, in relation to the scheme, and
(c) contributions have been paid under the arrangements in respect of, or on behalf of, two or more employees.
(6) In subsection (5) “direct payment arrangements” means direct payment arrangements within the meaning of section 111A of the Pension Schemes Act 1993 or section 107A of the Pension Schemes (Northern Ireland) Act 1993.
Unilateral changes
117B (1) The provider of a pension scheme to which this Part applies may—
(a) amend the terms of the scheme as regards a description of pension pot held by the scheme,
(b) change the investments comprised in a description of pension pot held by the scheme,
(c) transfer a description of pension pot held by the scheme to a different pension scheme operated by the same provider, or
(d) transfer a description of pension pot held by the scheme to a pension scheme operated by a different provider.
(2) A change or transfer within subsection (1)(b) to (d) may be effected notwithstanding that it breaches a term of the pension scheme (such as a requirement for consent); and any such breach is to be disregarded for all purposes.
(3) Subsection (1) is subject to—
(a) subsection (5), sections 117D to 117F and any regulations under section 117H(1)(c), and
(b) any other provision of legislation (including any rule) which restricts or otherwise affects the provider’s power to do anything within subsection (1).
(4) In subsection (1)(c) and (d), a reference to a pension scheme to which a description of pension pot may be transferred includes a pension scheme to which this Part does not apply.
(5) A transfer to a pension scheme operated by a different provider may not be effected under subsection (1)(d) without the consent of that provider.
(6) A reference in this Part to the terms of a pension scheme is to the terms of any instrument or agreement—
(a) in which the scheme is comprised, or
(b) to which the provider of the scheme and any member are parties in connection with the scheme.
(7) In this Part, “unilateral change” means an amendment, change or transfer within any of paragraphs (a) to (d) of subsection (1).
Effect of transfer of pension pot on membership of scheme etc
117C (1) This section applies where a pension pot is transferred under section 117B(1)(c) or (d) to a different pension scheme (“the receiving scheme”).
(2) The individual—
(a) becomes a member of the receiving scheme in relation to the pot, and
(b) in a case in which there is more than one arrangement under the receiving scheme, becomes, in relation to the pot, a member of the arrangement specified in the unilateral change notice under section 117F(3)(b),
and acquires the rights, and becomes subject to the obligations, of membership.
(3) Where being a member of the receiving scheme in relation to the pot, or of the arrangement under the receiving scheme under which the pot is to be held, entails being a party to a contract with the provider of the receiving scheme, a contract is treated as entered into between the individual and the provider—
(a) at the time at which the pension pot is transferred to the receiving scheme, and
(b) on the terms communicated to the individual in the unilateral change notice under section 117F(3)(c).
Best interests test
117D (1) The provider of a pension scheme to which this Part applies may effect a unilateral change under section 117B(1) only if—
(a) the provider concludes, before doing so, that the best interests test is met in relation to the unilateral change, and
(b) it is reasonable for the provider to have reached that conclusion at that time.
(2) “The best interests test”, in relation to a unilateral change, is that it is reasonably likely that effecting it will achieve—
(a) a better outcome for the directly affected members of the scheme (taken as a whole), and
(b) no worse an outcome for the other members of the scheme (taken as a whole),
than the relevant alternative action or, where there is more than one alternative action, each of them.
(3) For the purposes of this Part, the members of a pension scheme who are “directly affected” by a unilateral change are the members for whom the scheme holds pension pots of the description in question.
(4) The following are “relevant alternative actions” for the purposes of subsection (2) in relation to a unilateral change—
(a) not effecting the unilateral change, and
(b) where the unilateral change is an internal change, each other internal change that could be made in accordance with this Part in relation to pension pots of the description in question.
(5) In subsection (4) “internal change” means a unilateral change that results in a description of pension pot held by the scheme being held—
(a) subject to a different arrangement under the same scheme, or
(b) subject to a particular arrangement under a different pension scheme operated by the same provider (including where there is only one arrangement under that scheme).
(6) The FCA must make general rules specifying considerations or information that must be taken into account in determining whether the best interests test is met.
Certification by independent person
117E (1) The provider of a pension scheme to which this Part applies may effect a unilateral change under section 117B(1) only if, before effecting it—
(a) the provider has appointed a person to review the proposed unilateral change, and
(b) the person appointed has given the provider a certificate under this section in relation to the proposed unilateral change.
(2) The person appointed must—
(a) be independent of the provider, and
(b) have such expertise as is specified in general rules made by the FCA.
(3) The certificate must certify that, in the opinion of the independent person—
(a) the pension scheme is a pension scheme to which this Part applies,
(b) the proposed unilateral change is within section 117B(1)(a) to (d),
(c) section 117B(1) is not disapplied in relation to the proposed unilateral change by regulations under section 117H(1)(a),
(d) any conditions prescribed under section 117H(1)(c) are met,
(e) the best interests test is met in relation to the proposed unilateral change, and
(f) the provider has complied with such other requirements as may be specified in general rules made by the FCA.
(4) The FCA must make general rules about appointments and certification under this section, including provision—
(a) for determining for the purposes of this section whether a person is independent of the provider of a pension scheme;
(b) specifying terms on which an appointment under this section must be made;
(c) about the form of a certificate and when it must be given.
(5) In this Part “the independent person”, in relation to a proposed unilateral change, means the person appointed under subsection (1)(a) to review it.
Unilateral change notice
117F (1) The provider of a pension scheme to which this Part applies may effect a unilateral change under section 117B(1) only after—
(a) the provider has sent a unilateral change notice to each of the required recipients, and
(b) the required notice period has expired.
(2) “A unilateral change notice” means a notice that includes such information relating to the unilateral change as is specified in general rules made by the FCA.
(3) General rules made pursuant to subsection (2) must, in the case of a unilateral change under section 117B(1)(c) or (d), require the unilateral change notice to—
(a) specify the pension scheme (“the receiving scheme”) to which it is proposed the pensions pots in question are to be transferred,
(b) specify, in a case in which there is more than one arrangement under the receiving scheme, the arrangement subject to which it is proposed the pots be held after the transfer, and
(c) where membership of the receiving scheme, or of an arrangement specified under paragraph (b), entails being a party to a contract with the provider of the receiving scheme, set out, or otherwise communicate, the terms of such a contract.
(4) “The required recipients” means—
(a) the members of the scheme directly affected by the change, and
(b) such other persons as may be specified in general rules made by the FCA.
(5) A unilateral change notice must be in such form, and be sent by such means, as is specified in general rules made by the FCA.
(6) In subsection (1) “the required notice period” means such period as is specified in general rules made by the FCA.
Further duties to make FCA general rules
117G (1) The FCA must make general rules—
(a) about the fees that may or may not be charged by the provider of a pension scheme in relation to unilateral changes effected under section 117B(1);
(b) imposing requirements on the provider of a pension scheme who proposes to effect, or effects, a unilateral change under section 117B(1) to provide information to the independent person;
(c) imposing requirements on the provider of a pension scheme who proposes to effect, or effects, a unilateral change under section 117B(1), as to the records they must keep and retain for the purposes of this Part.
(2) The rules made by virtue of subsection (1) must apply in relation to pension schemes established before, as well as those established after, those rules (or this section) came into force.
Treasury regulations
117H (1) The Treasury may by regulations—
(a) provide that section 117B(1) does not apply in relation to unilateral changes of a description specified in the regulations;
(b) amend section 117D (best interests test);
(c) prescribe further conditions (in addition to those in sections 117D to 117F) that must be met in relation to a unilateral change for it to be permitted under section 117B(1);
(d) require the FCA to make general rules in compliance with section 117E(4)(b) that require the inclusion, in the terms of an appointment under that section, of a term providing that members of the pension scheme may in their own right enforce the terms of appointment under section 1 of the Contracts (Rights of Third Parties) Act 1999;
(e) disapply any legislation, or require the FCA to disapply any general rule, so far as it restricts or otherwise affects the power in section 117B(1);
(f) make provision consequential on this Part.
(2) The Treasury must by regulations require the FCA to include provision of a description specified in the regulations in general rules made in compliance with section 117E(4)(a) (how to determine whether a person is independent), alongside any other provision included in such general rules.
(3) Regulations under subsection (2) must in particular require the FCA to include in such general rules provision designed to ensure that the independent person does not have a conflict of interest.
(4) The power to make regulations under subsection (1) is capable of being exercised so as to amend or repeal any provision of primary legislation.
Interpretation of Part
117I (1) In this Part—
“the best interests test” has the meaning given by section 117D(2);
“directly affected”, in relation to a unilateral change, has the meaning given by section 117D(3);
“FCA-regulated”, in relation to a pension scheme, has the meaning given by subsection (2);
“the independent person”, in relation to a proposed unilateral change, has the meaning given by section 117E(5);
“money purchase benefits” means money purchase benefits within the meaning of the Pension Schemes Act 1993 (see section 181(1) of that Act) or the Pension Schemes (Northern Ireland) Act 1993 (see section 176(1) of that Act);
“pension pot” has the meaning given by subsection (3);
“pension scheme” has the meaning given by section 1(5) of the Pension Schemes Act 1993;
“personal pension scheme” means a personal pension scheme within the meaning of the Pension Schemes Act 1993 (see section 1(1) of that Act) or the Pension Schemes (Northern Ireland) Act 1993 (see section 1(1) of that Act);
“provider”—
(a) in relation to an FCA-regulated pension scheme, means the person referred to in subsection (2)(b);
(b) in relation to any other pension scheme, means the trustees or managers of the scheme;
“terms” , in relation to a pension scheme, has the meaning given by section 117B(6);
“transfer”, in relation to a pension pot, includes a transfer of an amount representing its value;
“trustees or managers”, in relation to a pension scheme, means—
(a) in the case of a scheme established under a trust, the trustees of the scheme, and
(b) in any other case, the persons responsible for the management of the scheme;
“unilateral change” has the meaning given by section 117B(7);
“unilateral change notice” has the meaning given by section 117F(2).
(2) A pension scheme is “FCA-regulated” if the operation of the scheme—
(a) is a regulated activity, and
(b) is carried on in the United Kingdom by an authorised person.
(3) “Pension pot” means sums or assets held for the purpose of providing money purchase benefits to or in respect of a member of a pension scheme; and—
(a) a reference to the pension scheme that holds a pension pot is to that pension scheme;
(b) a reference to the individual for whom a pension pot is held is to that member.”
(3) In section 105 (insurance business transfer schemes), in subsection (3), at the end insert—
“Case 6
Where the scheme is effected under Part 7A (unilateral changes to pension schemes).”
(4) In section 168 (appointment of persons to carry out investigations in particular cases), in subsection (4), after paragraph (i) insert—
“(iza) a person has effected, or has purported to effect, a unilateral change under subsection (1) of section 117B (unilateral changes by providers of pension schemes), but any of the provisions mentioned in subsection (3) of that section may have been contravened in relation to it;”.
(5) In section 429 (Parliamentary control of statutory instruments), in subsection (2B), after paragraph (ab) insert—
“(ac) provision made under section 117H which amends or repeals any provision of primary legislation;”.

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Source: https://www.legislation.gov.uk/ukpga/2026/22/section/49 (the official version)
Page: https://openlegislation.uk/pension-schemes-act-2026/section-49
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.