Implementation of reforms takes centre stage for pensions

Across the UK, the Netherlands, and Germany, pension providers are moving from a period of intense policymaking to one of implementation. In this article we explore the key themes and practical considerations for pension fund decision-makers in each market.

• In the UK, trustees will need to focus simultaneously on consultations arising from the Pension Schemes Act and on system changes to implement value-for-money reporting, private market investments, and decumulation strategies.
• In the Netherlands, the shift from DB to DC requires providers to rethink investment strategies and place greater focus on the decumulation phase, with more flexible and variable income outcomes rather than fixed lifelong benefits.
• In Germany, providers must prepare for a major overhaul of private pension provision ahead of the 1 January 2027 launch of new capital market-focused products.

Theme 1: Strengthening value for members

Regulators aim to finalise the DC value-for-money framework, following a further public consultation, before the end of 2026. At the same time, DWP will consult on draft regulations and guidance for trust-based schemes.

Crucial to the framework’s success will be:

• Whether it can shift industry focus from “lowest cost” to better member outcomes.
• How it accounts for differing scheme objectives and glide paths to retirement, rather than forcing a one-size-fits-all approach.
• How it enables innovative investment approaches across the member journey rather than promoting benchmark-hugging.

Ahead of the 2028 VfM reporting deadline, trustees should consider how to maintain their investment philosophy amid pressure to track the benchmark, or peer group, more closely, and how scheme members may react to the first disclosures.

Theme 2: Asset allocation – delivering on the Mansion House Accord

With the May 2025 Mansion House Accord now in place for over a year, signatories must demonstrate progress towards the 2030 target allocations: 10% of AUM to private market assets, with 5% in the UK. 

Following amendments in the House of Lords, the government’s backstop power to mandate asset allocations in line with the accord has been significantly weakened.  Nonetheless, boards should monitor forthcoming consultations, including on what qualifies as a “UK asset”.

Trustees must balance regulatory disclosure demands and potential penalties with the commitments made under the accord. A clear view of long-term member outcomes, and of the role different private market assets can play in delivering them, will be essential. This includes considering private market allocations in the pre- to post-retirement phase of the retirement lifecycle.

Theme 3: Retirement income and the new decumulation duty

For the first time, trustees will be required to offer, either in-house or via a third party, a “default” retirement pathway designed to provide regular retirement income while removing investment, longevity and sequencing risk from members.

DWP will shortly consult on the detailed rules for guided retirement.  Trustees will therefore need to move quickly to put solutions in place by the current end-2027 deadline.

Key considerations include not only the characteristics of component investment building blocks of any solution — such as flexibility, growth, income, cash, etc. —  but also how choices around retirement income solutions might affect members’ glide paths in the final years of accumulation.

Theme 4: Wider tax and policy changes

Alongside the DC policy changes in the Pension Schemes Act, boards must also prepare for wider tax and pensions reforms. At the end of October, the final connection deadline, the Pensions Dashboard Programme, is expected to confirm when the first dashboard is due to go live. Trustees should consider how members may respond to dashboard information, particularly on multiple pots and contribution rates, and how targeted support or other interventions might help steer them towards good outcomes.

Trustees should also anticipate any significant member responses to the 6 April 2027 changes to the inheritance tax treatment of DC pension pots.

Trustees will also be awaiting the DWP’s response to the recent consultation on trusteeship and governance. A response is expected by year-end and may include proposals for regulatory change.

Key considerations for UK trustees

The value-for-money framework involves a mindset shift from cost to delivering clearly defined outcomes. This involves aligning outcome to product choice, clearly showing the enhanced member outcomes as schemes, for example, choose to remain invested in growth assets for longer which may require more complex products to preserve capital when needed in the retirement journey. Innovation is also needed in the re-design of glidepaths to, as an example, focus on cash flow matching in the first few years of retirement, rather than de-risking to a core fixed income post-retirement portfolio which won’t be appropriate for every member based on pot size and post-retirement choices.

The Mansion House Accord is likely to drive assets towards private markets. But defining the investment hurdle for each private market allocation is key to improving member outcomes over the longer-term. Private markets play a key role in enhancing growth and delivering income in a way that diversifies the broader portfolio and with the right scheme design can be held to and through retirement. Defining a blended approach across growth and income assets, across the public to private spectrum can be a helpful way to blend assets to achieve very specific investment outcomes over the longer-term.

The challenge with the decumulation duty is designing solutions that offer flexibility around a core default portfolio. Building a framework can help with defining the most appropriate building blocks to blend together, which can be blended into a core default ‘persona’ portfolio with alternative personas offered for more engaged members. As an example, a deferred income requirement or the need for a flexible income source rather than an annuity can define the asset allocation for each pre-defined persona. This enables personalisation, but with scalability.

Tax and policy changes play a critical role in shaping individual behaviour. While the pensions dashboard will materially increase visibility of defined contribution (DC) assets, this transparency alone may not lead to optimal decisions. Without a clear understanding of available options, individuals may take short-term actions — such as withdrawing what they perceive to be ‘small’ pots — which could undermine longer-term retirement outcomes.

Targeted support can help address this gap by guiding individuals towards more appropriate pathways. For example, smaller pots — particularly where they are one of several holdings — could remain invested in growth assets, preserving optionality and enhancing flexibility later in retirement.

Flexibility is increasingly important in the context of evolving tax regimes, including inheritance tax treatment. The ability to adapt strategies over time, in response to policy changes, will become a key consideration for retirees. As such, maintaining a balance between liquidity and long-term growth — particularly within income-generating assets — is essential to support both adaptability and sustainable retirement outcomes.

Netherlands: The transition gathers pace

The Future Pensions Act (Wet toekomst pensioenen) continues to reshape the Dutch pension landscape. As of 1 January 2026, approximately 9.5 million workers are in schemes that have begun transitioning to the new defined contribution system, ahead of the 1 January 2028 deadline.

The next major milestone is anticipated to be January 2027, when a second wave of funds is expected to transition. This second wave will be closely watched for its market impact, particularly the repoositioning and potential reduction of long-dated bond and swap positions that underpinned the old DB-style hedging framework.

For providers, the transition to DC requires a fundamental shift in mindset. In a DB system, pensions sit largely in the background; in a DC environment, outcomes become far more visible and personal. The focus shifts from identifying  an asset mix primarily driven by funding and liability considerations, to defining the desired pension outcome alongside pension scheme members and selecting the investments that support it.

Providers will also need to pay closer attention to glide-path design. Rather than automatically reducing risk, pension schemes may now be able to remain in growth assets for longer than they could under the DB model. They may also place greater emphasis on the role of private market assets in the portfolio, provided they have a clear view of what each asset class is meant to deliver, from diversification and growth to stable cash flows.

The transition to defined contribution (DC) requires a fundamental re-think of the investment building blocks used by Dutch pension schemes. Going forward, there will be an increased focus on continuing to grow DC assets for as long as possible, to deliver sustainable and adequate income streams for individuals entering retirement.

This shift will necessitate a redefinition of traditional glidepaths — moving away from a model centred on de-risking into fixed income, towards one that de-risks into a more balanced blend of growth and income-generating assets. The objective is not simply capital preservation, but the optimisation of long-term outcomes through maintaining exposure to return-seeking assets alongside delivering stable income.

Private markets are likely to play an important role within this evolving framework. They offer the potential to enhance returns, provide diversified sources of growth, and deliver income streams that can support retirement cash flows. As such, they are well-positioned to complement both public growth assets and traditional income strategies.

Crucially, schemes will need to clearly define their investment hurdles and targeted member outcomes. Establishing a robust framework — anchored in explicit return, income and risk objectives — will enable the construction of portfolios that incorporate the most appropriate mix of building blocks based on outcome, not asset class. This clarity will be essential to ensure that investment design remains aligned with member needs, while retaining the flexibility to adapt to changing market conditions and policy environments.

Germany: The end of Riester, the dawn of the AVD

The German Bundestag passed the Altersvorsorgereformgesetz on 27 March 2026, replacing the long-criticised Riester pension with a new Altersvorsorgedepot (AVD) framework effective 1 January 2027. The legislation was finalised by the Bundesrat on 8 May 2026.

The AVD represents a paradigm shift. For the first time, state-subsidised retirement savings in Germany can be invested in ETFs, equities, and actively managed funds without a mandatory 100% capital guarantee.

With approximately 16 million existing Riester contracts and no new Riester products permitted from 2027, the shift to AVD-compliant solutions represents a substantial market opportunity — but providers face a tight implementation timeline.

As providers develop new capital market-focused solutions, they must consider not only the optimal asset mix for accumulation but also the glide path into retirement, particularly for those seeking to enter managed drawdown rather than purchasing an annuity.

In Germany, the initial focus of the evolving DC system is likely to be on growth assets, anchored in value‑for‑money principles, to enable greater participation in equity market dynamics and improve return potential relative to the legacy pension framework.

However, an exclusive focus on growth risks overlooking the broader challenge of supporting individuals both into and through retirement. Delivering effective pension outcomes will require not only well-designed investment solutions, but also strong engagement — arguably as critical as the underlying portfolio construction itself.

The three available product structures — full capital guarantee, 80% guarantee, and no guarantee — each necessitate distinct investment building blocks. Higher levels of guarantee will naturally constrain growth exposure and require greater use of capital preservation and hedging strategies, while solutions with no guarantee offer significantly more flexibility to allocate to growth and higher returning income-generating assets.

Defining these building blocks within a clear and robust framework is therefore essential. Such a framework should link guarantee design, return objectives, and risk tolerance to an appropriate mix of growth, income, and defensive assets. This will not only support consistent and scalable solution design, but also ensure that portfolios remain aligned with savers needs across different stages of the retirement journey.