Regulatory Changes and the Skills needed for Future Leadership

The Pension Schemes Bill passed its third reading in parliament on 3^rd December and progressed to the House of Lords. The UK pensions landscape therefore looks to be entering a period of structural and regulatory transformation.

These shifts will impact all public sector organisations involved in pensions governance, regulation, investment or administration.

Leaders across these bodies will require new capabilities to supervise, comply with, or operate within a more data-driven, consolidated and digitally connected system.

What is changing in Public Sector Pensions?

Greater regulatory clarity and oversight of DB (Defined Benefit) schemes. DB schemes remain a core part of public sector pensions (LGPS, USS, Railpen, many public bodies). Reforms include:

• A new DB Funding Code with stronger long-term planning requirements
• Revised surplus-management rules
• Increased focus on employer covenant strength
• More transparent, standardised reporting.

These changes affect governance bodies, investors, administrators and actuaries across the sector.

Large-scale consolidation and pooling. The Government is accelerating consolidation across the entire pensions industry, linking policy to economic growth and governance improvement. This includes:

• Continued pooling of investments across the LGPS
• Policy pressure on small schemes (DB and DC) to merge or transfer
• Growth of large, professionally governed vehicles such as master trusts
• Potential movement towards “megafund” models.

These changes mean that public sector bodies must be prepared for larger investment platforms and more complex governance and increased scrutiny of scale, efficiency, and system-wide risk.

Pensions Dashboards and sector-wide data connectivity. All schemes, from large DB funds to small public schemes, will be required to:

• Connect secure data feeds
• Meet common data standards
• Strengthen cyber-security
• Provide real-time or near-real-time member information Improve data quality, matching and validation infrastructure.

This places large operational and technology burdens across public sector pension bodies.

Intensifying focus on operational resilience and cyber security. Because dashboards introduce cross-industry data sharing, expectations are rising for:

• Cyber audits
• Incident reporting standards
• Third-party vendor oversight
• Continuity planning
• Fraud detection systems.

All public sector schemes, regulators and administrators will need to meet these higher resilience standards.

Stronger ESG, stewardship and responsible investment expectations. Public sector funds are increasingly expected to demonstrate:

• Transparent climate risk reporting
• Robust stewardship activity
• Clear responsible-investment policies
• Alignment with TCFD / SDR standards
• Integration of ESG into mandates and manager oversight

This affects Local Government Pension pools, PPF, NEST, Railpen, USS and others more intensely due to their size and systemic role.

Government interest in unlocking pensions capital for national priorities. Public sector funds are central to policy ambitions related to:

• UK infrastructure
• Growth equity
• Innovation financing
• Net-zero investment.

Leaders must balance fiduciary duties with political expectations, while maintaining independence and evidence-based governance.

How will the changes impact key skills and expertise in Public Sector pensions leadership?

Digital, Data and Technology Leadership. Given dashboards, consolidation and data-driven supervision, it will be critical for public sector pensions bodies to be led by those who understand:

• Data architecture and data governance
• Cybersecurity and privacy frameworks
• Digital platform transformation
• Automation and workflow modernisation
• Predictive analytics and risk modelling
• Integration with national systems (dashboards, HMRC, digital ID).

Actuarial, funding and financial risk capability. For DB-heavy bodies (LGPS funds, PPF, USS, Railpen, GAD, TPR), leaders require deeper financial and actuarial literacy with deep knowledge of long-term funding strategies. Boards and senior executives must be capable of interpreting increasingly technical metrics.

• Asset–liability modelling
• Investment risk and stress-testing
• Surplus management and covenant risk
• Valuation oversight.

Policy, regulatory and legal strategy skills. As regulatory frameworks change, to fulfil statutory duties, it is
essential that leaders have the capability to:

• Translate legislation into operational policy
• Maintain compliance with evolving codes
• Engage with DWP, HM Treasury, FCA, TPR and PPF
• Prepare for higher scrutiny of decisions
• Balance political and fiduciary considerations

Investment and portfolio governance expertise. With consolidation and growth-focused policy, investment governance becomes more complex. Leaders across LGPS pools, PPF, NEST and other schemes will need:

• Multi-asset portfolio oversight
• Private markets, infrastructure and alternatives expertise
• Responsible investment and stewardship sophistication
• Understanding of liquidity, collateral, and LDI frameworks
• Procurement and oversight of external fund manager.

Stakeholder engagement and political navigation. Public sector pensions operate in a complex governance environment, so leadership must combine strong stakeholder management skills including employee relations, technical credibility and transparency to build public and political trust.

What do organisations need to do now?

Public sector pension organisations should increase focus on culture, leadership and talent development, with increased capability in:

• Attracting technologists, analysts and data experts
• Retaining investment and risk specialists
• Strengthening governance teams
• Building diverse and inclusive leadership pipelines
• Creating a culture that prioritises integrity, transparency and innovation.

This is particularly pressing as talent shortages worsen across actuarial, admin, data and investment specialisms. In a competitive talent market, talent strategies need to be embedded into their business strategy, elevating talent attraction and development from an HR function to a core business priority.

Employee branding is vital, with research supporting the value of a strong Employer Value Proposition (EVP) highlighting purpose, company culture, benefits and growth opportunities. Gartner reported a 50% increase in qualified candidates and a 69% reduction in annual churn when EVP is clearly communicated.
There is a huge volume of concurrent transformation across the sector all competing for a limited pool of experienced leaders. Relationship-led, insight-driven and network-powered Search (Executive and Non-Executive) is essential in a tough talent market. Ensuring a positive candidate journey leads to increased engagement in future campaigns and fosters good reputations in the market. Relationships are especially important when seeking diverse, high-demand candidates.
Compelling pay scales are key to attracting and retaining in-demand talent. They should be based on robust market insights into target functions and sectors.

Flexibility in sector background can significantly improve attraction outcomes, with a focus on transferable skills. Consideration of emerging talent is also of value, as well as non-UK experience. It should be considered however, the success of candidates from a different sector or stepping up into a role depends on inclusive organisational culture and effective personalised support mechanisms. Tailored onboarding support, ongoing training and mentoring – incorporating bespoke leadership effectiveness acceleration support – are crucial for long-term success.

Consider Leadership as a Service (LaaS) to support successful transformation – effective change leadership is critical. LaaS is the on-demand deployment of executive level expertise without the permanence of traditional appointments. Instead of recruiting a full-time C-suite leader with a five-year horizon, organisations can tap into leadership capability in three primary forms:

• Interim Leaders – Senior executives brought in full-time but temporarily (typically 6–18 months).
• Fractional Executives – Board-level leaders engaged on a part-time basis, often a few days per week.
• Project-Based Specialists – Executives brought in for “sprints” such as digital transformations, sustainability transitions, or post-merger integrations.

Conclusion:

Marcus Luke, Partner

‘‘The scale of the changes to the UK Pensions sector will inevitably bring significant transformation, and a competitive talent market particularly for leaders who can combine technical expertise with leadership capability.

Strategic attraction, engagement, development and retention are critical to ensuring organisations have the required talent and skills. Organisations that embrace the emerging concept of Leadership as a Service – a flexible, scalable, and outcome-driven resource – will be best placed to adapt to the dynamic landscape, able to move faster and transform more successfully.”