The government has announced plans to review Flexible Apportionment Arrangement (FAA) regulations following the landmark transfer of the Stagecoach Group Pension Scheme (SGPS) to Aberdeen.

In a statement, Pensions Minister, Torsten Bell, confirmed that the Department for Work and Pensions (DWP) intends to consult on whether existing FAA regulations should be strengthened after a "novel use" of the mechanism enabled an asset manager to assume responsibility for the liabilities and assets of a DB pension scheme.

The transaction, completed in December 2025, saw Aberdeen take on sponsorship of the SGPS through an FAA, becoming the first asset manager to use the mechanism in this way.

At the time, the deal was hailed as a significant development in the DB market, with supporters arguing it could provide an alternative route for well-funded schemes seeking improved member outcomes and long-term security.

However, Bell noted that although the transaction complied with existing legislation, it was undertaken in a manner not envisaged when FAAs were introduced in 2012.

"We therefore intend to review this area of legislation to ensure the regulatory standards and safeguards evolve and keep pace with the innovation we are seeing in the pension market," he said.

Bell added that the review would consider whether additional protections were needed where mechanisms such as FAAs were used in ways that involve the commercial operation of DB pension schemes.

The minister pointed to the Pension Schemes Act 2026, which introduced a statutory framework for DB superfunds, noting that the legislation included safeguards to ensure that the interests of commercial operators align with those of scheme members.

"This contrast highlights the importance of considering whether additional safeguards are required where other mechanisms, such as FAAs, are used in ways that similarly involve the commercial operation of DB pension schemes," he continued.

"We will therefore consult in due course on whether and how existing FAA regulations could be strengthened."

Bell emphasised that the government wanted to support innovation that could improve member outcomes, but argued that regulatory frameworks must evolve alongside new business models.

"Where providers are looking to run schemes for profit, this can work in scheme members' interests but regulatory standards and safeguards must evolve to match the new risks this creates," he stressed.

Responding to the announcement, LCP partner, Steve Hodder, who led the consultancy's advice to Stagecoach on the transaction, welcomed the government's intention to review the framework.

"We are supportive of having the right pragmatic safeguards in place to support the interests of scheme members, which mirrors how the Stagecoach process was advised and run," he said.

"We therefore welcome the DWP taking action to consider how to 'level up' the formal requirements sitting behind FAAs - to ensure that schemes following the Stagecoach route manage the interests and potential risks as thoroughly as in this pioneering case, alongside giving members the potential to benefit from improved outcomes."

Hodder also backed the government's broader approach to encouraging innovation within the DB market.

"Innovation, choice and competition can be a real positive for consumers," he stated.

"It's great to see the Pensions Minister embracing that, and the potential for the UK's DB schemes to improve outcomes for all stakeholders."

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