The Pension Raid No One Saw Coming
For British expats with any defined benefit / DB pensions, a quiet but consequential change is on the horizon. The UK Government’s Pension Schemes Bill proposes amendments that carry significant risk for those depending on this secure, inflation-protected income during retirement. While officials dress it up as freeing “trapped capital” for growth, what it amounts to for many pension holders is the legalisation of employer access to pension surpluses at your expense.
The proposed legislation allows companies to reclaim pension scheme surpluses that had previously been safeguarded by trust deeds and legislative boundaries. In practice, it means the financial security you planned for, on the understanding that your pension pot was locked in and protected, could be loosened. It’s even worse that it proposes to grant trustees powers to override a scheme’s original terms, eroding the legal foundations that were specifically constructed to prevent future misuse.
Trustees, who were once bound tightly by rules designed to protect pensioners, will now have greater control to change scheme rules in favour of your previous employer, not necessarily in favour of you. If implemented, this sets a precedent that trust deeds are no longer sacrosanct.
A Quiet Threat Facing Us Abroad
Our readers are typically seasoned professionals now working or retiring overseas. Many spent decades working in UK industry or public service, so their pensions are not windfalls, but entitlements earned through long, structured contributions.
Defined Benefit pension schemes were considered dependable – anchored by funding obligations, oversight, and legal structure.
Those rules are now shifting.
The Bill enables trustees to alter scheme rules and release surplus funds to the employer, even where this had previously been expressly prohibited. Furthermore, the legal test that trustees act “in the members’ interests” is being removed. In its place stands a more ambiguous fiduciary duty that, in reality, opens the door to company influence.
The prospect that trustees could be guided by wider interpretations of duty – including the employer’s financial strategy – should be cause for concern. Particularly for expats, who are often geographically removed from the centres where these decisions are made, the risk of being sidelined or overlooked increases.
We’ve seen the writing on the wall already. BP and Shell refused to grant discretionary increases to pensions – even during years of sharp inflation and substantial scheme surpluses. That wasn’t a one-off. That was a test balloon. And the government appears ready to rubber-stamp it as policy.
The Rewriting of Responsibility
Historically, trust deeds functioned as firm contractual obligations.
Trustees were custodians, not collaborators. But with the Bill, those lines are being redrawn. Trustees can now rewrite rules to permit refunds to the employer, bypassing the checks that were put in place following previous pension scandals. The explicit prioritisation of members’ interests is being displaced by a framework where employer considerations can, and likely will, take precedence.
What follows is predictable: if a scheme has a surplus, there will be pressure – internally or via the parent company’s finance department – to monetise it. And once that money exits the fund, the security buffer is gone. Should markets stumble, or the employer’s covenant weaken, pensioners may find themselves depending on the Pension Protection Fund (PPF), where payouts are capped and inflation protection is diluted.
Worryingly, the proposed legislation undermines the principles that have underpinned defined benefit pensions for decades. The idea that these schemes exist primarily to serve retired members is being diluted in favour of freeing up resources for corporate use. This is not a minor technical amendment – it is a material shift in the philosophy behind pension regulation.
Expats, especially those currently working industry jobs overseas and are out of the daily loop – must be alert to this quiet erosion. In many schemes, long-standing member-nominated trustees are being replaced or overruled. What appears on the annual statement as a surplus could be earmarked for the balance sheet long before any member sees a penny. Worse still, these surplus reallocations may occur without broad consultation or detailed communication.
Who Is Most at Risk?
This change matters most to those in the following situations:
- Pensions with partial or limited inflation protection (pre-1997 service especially)
- Members relying on trustee discretion for increases or special uplifts
- Deferred members not yet drawing their pension
- Well-funded schemes now closed to new entrants
- Schemes with profitable parent companies eyeing “efficiency”
- Individuals who live abroad and are more likely to miss key notices or changes
If that describes your position, you may be offered a small uplift – 2%, maybe 3% – framed as a benefit improvement. But make no mistake: it’s likely a concession to pave the way for a much larger corporate withdrawal. And when that money’s gone, so is the margin of safety in your scheme.
The risk isn’t dramatic collapse. It’s slow attrition: your pension doesn’t rise as expected, discretionary benefits vanish, and the scheme winds up with no member recourse.
Many expats rely entirely on their pension income and have no access to UK safety nets such as Pension Credit or cold weather assistance. If their income begins to lose value against local living costs or suffers as a result of decisions made by distant trustees, the consequences are real – and often irreversible.
Signs You Must Not Ignore
Be alert for these developments:
- Funding status described as “low dependency” or “self-sufficient”
- Refusals to grant discretionary increases despite inflationary pressure
- Notices about proposed rule changes, even if couched as minor updates
- Sudden replacement of trustees or reduction in member-nominated representatives
- Announcements about buy-outs, insurer transfers or consolidation into larger schemes
- Transfer value offers framed as one-off opportunities or incentives
- Removal or dilution of discretionary increase mechanisms
- Reduction in communication from scheme administrators or trustees
These are not administrative formalities. They are precursors to changes that may reduce your pension’s real-world value or remove your voice from decisions entirely.
Practical Next Steps for those with DB Pensions
- Seek documentation. Contact your scheme and request a current trust deed, funding statement, and clarification on surplus use policies.
- Connect with peers. Form or join a pensioner group – especially one tied to your former employer. There is strength in shared information. Coordinated response can apply pressure and increase scrutiny.
- Ask direct questions. Ask for help – reach out to someone with expertise or your own trustees about whether they intend to change rules under the new legislation. Ask what protections are in place for inflation-exposed members. Ask for minutes of meetings and confirm the independence of the trustee board.
- Consult professionals. If offered a transfer value or early retirement package, do not accept without advice from a qualified, UK-regulated adviser. Consider currency exposure, inflation forecasts, and loss of discretionary rights.
- Stay informed. Monitor announcements from The Pensions Regulator, the scheme, and your former employer. This isn’t just pensions policy – it’s your income. Make it your business to follow the guidance.
- Make yourself heard. If your scheme is proposing a rule change or entering buy-out talks, write to the trustees. If you’re concerned about fairness, raise the issue. Quiet schemes are easy targets.
- Keep your paperwork organised. Ensure your contact details are up to date, and that you receive all scheme communications, regardless of your location. Opt into all digital updates.
- Consider political representation. If you’re still registered to vote in the UK, contact your MP and explain your concerns. Expats should not be invisible in this debate.
Why It Matters More for Expats
Expat pensioners often live without access to the UK’s social top-ups. There is no pension credit overseas. No winter fuel allowance. The company pension is often the pension – and its erosion by stealth will be felt more acutely by those abroad than those back home.
You may already be paying more for healthcare, insurance, and international transfers. A few percentage points lost to inflation each year – without a discretionary increase – compounds rapidly. The pension that once bought stability becomes, over time, barely sufficient.
Read more about discretionary increases here.
Some expats live in countries where exchange rates are volatile. If the pound weakens, a pension that is not inflation-adjusted in real terms can quickly become inadequate. And if that happens, there is often no second income to fall back on.
Living overseas also places you at a distance from decisions being made about your future. When trustees meet or when consultations occur, few expats are represented. Even fewer are aware.
As one pensioner put it, “We all read about it online, but I’ve never heard from my scheme.”
That must change.
Closing Thoughts
The UK Government is attempting to unlock capital it believes is sitting idle. But what it sees as a fiscal asset is, in truth, the lifeline for thousands of pensioners who upheld their end of the contract.
Once again, the question is being asked: who is this really for?
British Abroad exists to ensure that expats don’t become silent casualties of policy drift. If your pension is under discussion, or your scheme is proposing changes, engage early. You won’t get another chance once the surplus is gone and the scheme is wound up.
Do not assume someone else is watching your back. The balance of power is shifting, and pensioners must respond not with outrage, but with informed, active vigilance.
We’re monitoring developments closely. If you need help understanding your situation or want to discuss next steps, we’re here to assist – clearly, discreetly, and without pressure.