With the recent publication of the long-anticipated Pension Schemes Bill, a significant milestone has been reached in the ongoing evolution of the UK’s retirement landscape. This legislative development has sparked widespread discussion among industry professionals, policymakers, and financial experts, many of whom are optimistic about the bill’s potential to modernise the pension system and enhance retirement outcomes for future generations. Based on the release, industry professionals have shared their views and insights on how they believe this will influence the sector moving forward.
Commenting on the publication of the Pensions Schemes Bill, Ian Bell, partner and head of pensions at RSM UK, said: “The Pensions Schemes Bill will introduce extensive reforms to both the Defined Benefit and Defined Contribution market, enhancing member protection, driving value for money, facilitating consolidation, and providing new de-risking avenues for legacy liabilities. Whilst a positive step in the right direction, these changes will take some time to implement, and it will be a while before any benefit to people’s pensions pots will be felt.
“For pension trustees, this legislation translates into significantly expanded fiduciary duties, demanding greater strategic oversight, particularly concerning investment decisions, member outcomes, and operational efficiency. The Pensions Regulator’s announcement, made on the same day as the Bill was launched, that it intends to drive up standards of trusteeship is timely and perhaps overdue. For pension managers, they will see a substantial increase in compliance requirements, reporting obligations, and the need for sophisticated data management and analytical capabilities.
“Whether DC or DB, the Bill acknowledges that the pensions sector is poised for accelerated consolidation, a shift towards more outcome-focused DC provision, and the emergence of a regulated superfund market, necessitating adaptation, innovation, and potentially new business models for service providers. This Act is not merely a set of amendments but a foundational shift, demanding proactive engagement and strategic realignment from all participants.
“If the proposals in the new Bill do deliver, this could be a win/win for pensions savers and the UK economy, but putting the changes in place will certainly add to the ongoing administration and compliance burden for those running schemes. “The missing piece of the jigsaw, that doesn’t get a mention, is that all of this won’t shift the dial on retirement outcomes without a much-needed increase in the rates of auto enrolment contributions. We hope that the second phase of this pensions review will come quickly on the heels of the first.”
Gail Izat, Managing Director for Workplace and Retail Intermediary at Standard Life, part of Phoenix Group said: “Hot on the heels of the Pension Investment Review we have the Pension Schemes Bill. The Bill builds on the government’s push for greater scale in DC savings and emphasis on value for money.
Enabling providers to consolidate savers into their primary default funds will be an important catalyst in delivering the government’s ambitions of DC mega-funds. Many providers already invest at scale but this approach will consolidate the number of default funds and help deliver greater efficiencies on behalf of savers.
In a number of important ways, the Bill looks to address some of the unresolved issues that emerged following the landmark auto-enrolment and pension freedom reforms. The proliferation of small pots has been a consequence of both auto-enrolment and the modern job market and consolidators will step in to bring together pots below £1,000. The detail and commercial model of this system will require considerable thought. It was good to see a reference to delivering on pension dashboards too as they will play a vital role building people’s connection with their pensions.
Pension freedoms have given people the ability to take their money as they see fit and research shows people value this ability to choose. However, it leaves people having to make significant decisions about how long they might live, where to invest and how much income they can afford to take. The introduction of Guided Retirement Options has the potential to be one of the most significant things the industry could do to ensure people are supported to make the most of their money. The initial focus here is on trust based schemes where there is a real mix of support at present, but the customer need applies across the board. It was interesting to see government reference longevity protection in their announcement as we believe having a degree of income certainty is vital when helping to manage essential expenses in retirement.
The value for money framework will enable people to compare schemes on a number of metrics including service quality and investment performance – not just costs and charges. There is still some detail to work through around how service targets are quantified and how the framework will apply to multi-employer schemes but ultimately a policy that helps people transfer from poor performing schemes into better ones should be welcomed.
In combination these policies place the focus for the industry firmly on scale, value for money and better engagement for people with their savings. They draw on lessons we’ve seen from other global pension systems where these levers have been used to deliver better outcomes for savers.”
Steven Cameron, Pensions Director at Aegon said:
“With an unprecedented volume of major Government-led change ahead for workplace pensions, it’s extremely important to understand how the various initiatives fit together.
We’ve been calling for the Government to publish a roadmap and welcome today’s document. This shows beyond doubt just how challenging it will be to get the implementation right. We’re pleased to see the dates are indicative and not set in stone, particularly when much of the detail remains unknown.
We’re pleased to have confirmation that small pot consolidation won’t start until after the scheme consolidation driven by the Pensions Investment Review has largely concluded. Attempting scheme and small pot consolidation concurrently would have been a recipe for disaster.
Perhaps the most surprising date on the timetable is that Master Trusts will have to start complying with Guided Retirement solutions in 2027, with GPPs a year later. Designing and implementing appropriate default retirement solutions for non-engaged workplace members will be hugely challenging. The ‘right’ retirement solution is highly personalised and different solutions will be needed for different groups depending on their need for security, attitude to risk, their health, any dependants and what other pensions they have.
We do hope the Government keeps an open mind on the roadmap dates, and continues to monitor progression – while we understand the Government’s desire for speed, it’s far more important to the millions of pension savers that the changes are ‘done right’.”
Sophia Singleton, President of The Society of Pension Professionals, said;
“Our members are pleased to see the Pension Schemes Bill published today, which gives us a clear line of sight on the many policy initiatives that have been in the pipeline.
As expected, it covers a number of changes on the DB side from DB surplus and superfunds to PPF levy flexibility. It also paves the way for the raft of DC changes proposed from default pension benefit solutions and Value for Money to small pot consolidation. The SPP has been actively engaging with government and regulators on these policy proposals in recent months; now it’s time for the detail.
The Bill creates the foundation for changes that should positively impact members, sponsors and trustees. We will support policymakers with the considerable work that lies ahead to develop the regulations and guidance that must underpin and deliver these initiatives.
As well as considering the impact the changes will have, it will be crucial to get the sequencing right. The next few years will be exciting!”
Commenting on the publication, Jonathan Lipkin, Director of Policy, Strategy & Innovation at the Investment Association, said:
“We have long supported the government’s ambition to consolidate smaller pension pots and scale up the UK pensions system, delivering an enhanced scheme investment process. Through ‘sophisticated scale’, schemes will be better placed to deliver the returns that enable people to build financial resilience, whilst also contributing to better capital allocation across the UK economy.
“Building up a pool of assets to fund retirement is a pre-requisite for the pension system to deliver good retirement outcomes. Pension savers will then need more help if they are to turn these assets into a stable and durable retirement income. We welcome the focus in the Bill on this important area and the investment management industry looks forward to contributing further to the process”.
“We look forward to the Government’s confirmation to move ahead with Phase 2 of the Pensions Review. Pensions adequacy is a crucial part of the puzzle to enable people to enjoy financial security into retirement.”
Commenting on the publication of the Pensions Bill, David Lane, Chief Executive Officer at TPT Retirement Solutions, said:
“The Pensions Bill represents a signal of intent, laying the foundations for a more coherent and sustainable pensions system, focused on improving outcomes for members. In drawing together several policy threads that have been under discussion for a long time, the Bill is a comprehensive step forward for the industry.
It’s particularly encouraging to see the government give renewed focus to the reform of Defined Benefit schemes, following an initial focus on Defined Contribution (DC).
Placing consolidation at the heart of this Bill is pragmatic and sensible. We believe consolidation is central to delivering better outcomes for savers, whether through master trusts, superfunds, LGPS pooling, or new CDC and DC models.
We look forward to working closely with the Department for Work and Pensions and the wider industry to implement and refine the proposed reforms through further engagement and secondary legislation.”
Commenting on the changes, David Saunders, senior partner of Sackers, says: “Described by the Government as a ‘game changer’, the Bill paves the way for some very major pensions developments. But a Bill’s passage through Parliament is a long and winding road, and there could be several twists and turns along the way. With detailed regulations to follow in many cases, there is therefore still a lot of ground to cover before the Bill’s provisions reach their ultimate destination as law.”
New obligations included in today’s Bill represent the culmination of many years’ work in some instances. But the scale of some of the changes, coupled with ambitious Government timescales, means that the pensions industry should take a collective deep breath to ready itself for the weeks and months ahead.”
Patrick Luthi, CEO of now:pensions, comments on the Pension Schemes Bill: “now:pensions have been campaigning on small pots for a number of years, and we are pleased to see measures to deliver the ‘multiple default consolidator’ solution included in the Bill. Measures to support members at retirement are welcome – but it’s vital that they work for all member segments, and that the risks of placing members into default solutions are addressed.
We look forward to seeing the details which will be crucial to supporting members in an efficient way.”
David Brooks, Head of Policy at leading independent consultancy Broadstone, said: “Following the publication of this Bill we hope to now see a period of delivery, consistency and certainty across the board in the pension’s world – no matter what colour of political party inhabits Number 10. Trust and security is critical to achieving positive outcomes, and constant tinkering with the system will inevitably confuse pension savers.
Workers will likely be saving into their Defined Contribution pension for over 40 years and they need to know that the fundamental rules will remain if they are to have faith in the system and be encouraged to up their contributions to achieve positive outcomes in retirement.
Bringing today’s reforms together and executing on the promise they have will be a huge challenge and the industry will be looking for a clear plan and timeline from the Government to achieve this.
Freeing up access to pension scheme surpluses will open up fresh investment possibilities for businesses, albeit we suspect the amounts released will be significantly lower than the headline grabbing £160 billion of potential funds. The Government has been explicit in placing firm guardrails around these new freedoms by ensuring that surpluses can only be released at the discretion of Trustees, whose strict Fiduciary Duty should provide sufficient protections to members.
This Bill is the blueprint for not much short of a revolution in the way Defined Contribution pensions are provided. Many of the reforms are long overdue following ‘freedom and choice in pensions’ in 2014 and creating a default pathway for members reaching retirement with only DC benefits will assist many unable to make a choice, albeit presenting a challenge for trustees.
If we consider these changes to the way providers build their default accumulation and decumulation products then, alongside the incoming pensions dashboard regime, this is likely to be a memorable Bill.
The Mansion House Accord will hang on the ability to build a VFM framework that provides value to member and employers when comparing providers. However, it must also be robust enough to allow meaningful and fair comparison especially when asset allocations may or may not be able to adhere to the government’s targets at all times.”
Tom Froggett, Head of Run-on Solutions, XPS Group said “The flurry of Government announcements and regulatory guidance over the last few weeks has made one thing clear – both the Government and TPR are aligned with the principle of giving well-funded DB schemes more flexibility to build and use surplus where it is safe to do so. We support this principle, and are pleased to see the Regulator’s recent guidance give a balanced overview of the different strategy options available to trustees and employers, including running on to build and use surplus.
The focus now turns to getting the details right. We need a clear blueprint for trustees and employers who are seriously considering running on, so that they can develop with confidence the strategic and operational frameworks to deliver the benefits of running on to members and employers. We are already seeing well-designed run-on strategies introduce a number of the disciplines used by other financial institutions such as insurers, providing both safety and upside for members.”
Patrick Lloyd, Head of Alternative De-risking, XPS Group said “The legislation is another step on the path to an active Superfund market with the government continuing to support the development of Superfunds as an alternative choice to the more traditional risk transfer options. Choice is generally good and there will situations where a Superfund offers a better outcome for members and other stakeholders, but it will be important to make sure that this is done in the right way with member’s interests at the heart of the decision making.”
Richard Birkin, Head of DC Pensions, at Isio, comments:
“The Pension Schemes Bill is a pivotal moment in the evolution of the UK retirement system. Mandating default decumulation solutions is an excellent way to respond to a long-standing challenge in pensions and provide savers with the structured, accessible support they need at the point of retirement, where individual decision-making becomes most complex.
We are pleased the Bill allows flexibility to innovate. By creating a space for innovation within a clear regulatory framework, the Bill paves the way for solutions that can deliver greater consistency and security for savers, while still allowing for new approaches that will address member needs.
We have strong views on what that innovation should look like. First and foremost, we believe default decumulation solutions should provide a stable and sustainable income for life. That means predictable, inflation-adjusted income net of fees. Secondly, we want to see residual death benefits maintained so that members do not forfeit their ability to pass on their pension simply because they have moved from accumulation into decumulation.
Thirdly, we want revocability. Members should be able to exit their default decumulation strategy if their circumstances change and the product is no longer suitable. And finally, we want flexibility and believe solutions should adapt over time to individual lifestyle needs, rather than locking members into rigid or inappropriate structures.
Trustees have a burden of responsibility that will now include ensuring robust governance, member-focussed design and the capacity to accommodate life changes, which will be essential to delivering the retirement outcomes the Bill’s default decumulation policy intends, and their members deserve.”
Damon Hopkins, Head of DC Workplace Savings at leading independent financial services consultancy Broadstone, commented:
On increasing allocations to UK assets and infrastructure
“The Pension Schemes Bill confirms the Government’s stated direction of travel last week of inserting a backstop law to firmly twist – if not mandate – the pension industry’s arm towards what it perceives as sufficient allocations to UK assets and infrastructure.
There continues to be a potential conflict, particularly if mandated, between a pension scheme’s fiduciary responsibility to maximise savers’ retirement outcomes (i.e. investing in assets with optimal risk/return profiles) and the advantages to the UK economy. While billions of pounds of investment into the UK economy will have obvious advantages, UK pension savers are inherently exposed to risks in the UK economy in their day-day lives so increasing this risk may not be optimal, nor is it guaranteed that the returns yielded will be better than those on offer globally.”
On consolidation
Bigger is better for the Government as it presses ahead with plans to force consolidation of Local Government Pension Schemes into a handful of ‘mega-funds’ and mandate a minimum size for defined contribution pension schemes. A fewer number of larger schemes should certainly deliver better value for members by creating the scale required to reduce fees and operate the scheme more efficiently.
A balance needs to be struck between a competitive market which inherently drives down cost and sufficiently large schemes which can leverage their scale to improve efficiency/cost, not to mention the distinct advantage of having to regulate fewer schemes, so it is pleasing that the Bill has softened in stance towards schemes under £25billion which will be allowed to continue operating if they see a road path towards reaching that size within ten years.”
On small pots
Further measures to make consolidation of small pension pots easier is welcomed, especially in tandem with the Pensions Dashboard due to come on stream later this decade. Recent research from the DWP showed that the number of deferred pots worth less than £1,000 across five large providers had grown rapidly since 2020 from 8.3 million to 11.2 million in 2024 highlighting the urgency of the issue.”
Tim Box, Chair, PMI Policy and Public Affairs Working Group, said:
“The Pensions Management Institute (PMI) welcomes the introduction of the Pension Schemes Bill — a landmark package of reforms set to transform the UK’s pension landscape. With sweeping changes including the Value for Money framework, small pots, DB Superfunds, guided retirement, and surplus extraction proposals, this represents the biggest overhaul of pensions in a generation. We particularly applaud the clarity provided by the accompanying Pensions Reform Roadmap, which sets out a clear path for sequencing and implementing these vital measures.
PMI supports the government’s balanced approach to Defined Benefit schemes, reducing the risk of trapped surplus while protecting members’ benefits and empowering trustees to manage assets more efficiently. However, we are disappointed with what we see as Government overreach in a number of areas of the Bill, including the reserve power to mandate investment in private markets – trustees current fiduciary duties towards their scheme members should remain their primary concern when making investment decisions. We are also very disappointed that the Bill does not address the Virgin Media resolution — a significant barrier for many trustees and sponsors that distracts from progress on these important reforms.
With this landmark legislation now introduced, the time for talking is over. PMI urges swift, decisive action to deliver real change for schemes, trustees, and members across the UK.”
Dan Kemp, chief investment and research officer at Morningstar, has provided the following insight:
“As ever, the devil will be in the detail. However the reforms appear to be following the Australian model which are well intentioned but flawed as ‘past performance is not a guide to future returns’. Consequently, a system that encourages ‘performance chasing’ is likely to exacerbate the ‘gap’ in returns that we have been flagging for many years.
Retirement planning is complex and mistakes cannot be typically undone as they are appreciated too late in life. A successful pensions bill would therefore encourage investors to see independent advice rather than attempt to oversimplify a complex problem.”
Michael Jones, Partner and Head of DC, Eversheds Sutherland, comments on DC aspects of the Bill:
“As expected, the Bill contains a major package of reforms designed to deliver the government’s vision for the future of the DC workplace pensions market – fewer, bigger, better value schemes. There is no doubt these reforms will reshape the UK’s workplace pensions market. There is now a lot of work for schemes and providers to do to deliver this vision – from implementing default decumulation options for their members to implementing automatic transfers for small pots. DC master trusts and providers will also need to make sure they are on track to meet the new scale requirements by 2030.
Although these reforms have been well trailed, there are some surprises. The Bill will pave the way for DC savers to potentially be defaulted into a collective DC scheme at retirement. Separately, the government’s reserve power to direct a minimum level of investment in UK productive assets looks set to apply to those DC schemes/providers caught by the scale requirements only and it will expire at the end of 2035 – which is at least two general elections away.
The hard work begins now, as we move from debate and discussion to implementation. It is helpful the government has set out its plans for the timing and sequencing of these different initiatives alongside the Bill. The direction of travel is clear, but schemes and providers will be scrutinising the government’s roadmap closely as this will be key to ensuring these reforms can be delivered successfully and efficiently.”
Sarah Swift, Partner, Eversheds Sutherland, comments on DB aspects of the Bill:
“As well as delivering the government’s vision for DC workplace pensions, the Bill will open up potential new opportunities for DB schemes and sponsors. Significantly, the Bill will remove some of the hurdles and make it easier for surplus funds held in DB schemes to be repaid to employers and members by reducing the funding level a scheme needs to reach. This will open up new options for trustees and sponsors of well-funded DB schemes. It is likely to prompt discussions within many schemes over how surplus funds should be used and whether to run the scheme on for longer.
The Bill will formalise the authorisation and supervision regime for DB superfunds, which may lead new entrants to join this market. It will also give the PPF more flexibility over the rate at which its sets future levies. This could see schemes relieved of the need to pay the PPF levy next year, which would be welcome news for DB schemes and their sponsors.
The volume of reforms contained in the Bill means the government has had to think carefully about the timing and sequencing of the various measures. On the DB side it has said it will prioritise the legislation on DB superfunds and the PPF levy. This will come as a disappointment to employers hoping to take advantage of the new flexibility on return of surplus which it appears is unlikely to be available until the end of 2027 at the earliest.
In a surprise move, the government has also announced today it will legislate to address the difficulties arising from the judgments in Virgin Media, regarding the need for actuarial confirmation where changes were historically made to contracted-out salary related schemes. This will come as welcome news to the many DB schemes and sponsors grappling with these issues. However, this is not set out in the Bill. So the terms and scope of this solution will need to be considered carefully when draft regulations are published to ensure this solution can be used to address all of the issues to which this case has given rise.”
Paula Llewellyn, CEO, DC & Workplace Savings at L&G comments:
“The new Pension Schemes Bill is a significant step towards improving outcomes for savers. Pension adequacy is a big concern – especially against the backdrop of ongoing cost of living pressures, so enhancing engagement and simplifying pension choices is crucial.
“Consolidating small, forgotten pension pots into one scheme could make retirement saving more manageable and rewarding, and potential integration into the Pensions Dashboard could make for an even clearer financial picture. A well-regulated Value for Money framework can drive consolidation and productive investing – for this to be successful, consistent rules must be applied across all schemes.
“We also support the Government’s move to ensure all savers have access to the full range of retirement income solutions. Collaboration between the Government, regulators, and the industry will be essential in making these reforms effective.
“But to really address adequacy we need to help people save more and start saving sooner. I’m looking forward to engaging with the second phase of the pensions review to support measures which will help more people to have the retirement they want.”
James Carter, Head of Platform Policy, Fidelity International, comments: “This Pension Schemes Bill will define what the Government achieves for pension scheme members in this parliament. It represents an important step forward for a wide-ranging package of pension policies, but for many of them much work is still ahead to bring them to reality.”
“Directing investment allocations risks not maintaining a primary focus on pension members’ outcomes. Fidelity International has a strong conviction in the merits of investing in private markets to support better outcomes for pension scheme members. For our defined contribution clients and members, whose investment horizon is measured in decades not years, we believe there is strong alignment in objectives of private market assets and member objectives.
“However, we continue to believe that pension schemes must be allowed to direct pension assets in members’ best interests, without a mandatory requirement to invest in specific markets or assets. Whilst the Government acknowledges progress being made by industry to invest in productive finance assets, the reservation of a power to direct pension scheme investments in the future remains a concern for Fidelity.”
“We believe pension scheme members’ assets should be invested through schemes that are structured to provide value for money, and lead to the best outcomes possible with a focus on net of cost investment returns. The historic focus on cost rather than longer-term value and outcomes has constrained innovation. Provisions in the Pension Schemes Bill to bring forward the new value for money framework are extremely welcome as this policy helps form the foundation of everything the Government is seeking to achieve.
“Facilitating the consolidation of pensions schemes is important and we appreciate the Government’s commitment to policies that facilitate the effective and orderly consolidation of schemes, enabling firms to easily transfer pension assets from underperforming schemes. It is important that firms are able to act decisively and quickly when better outcomes can be achieved by consolidating assets into a different pension scheme.
“We look forward to working with the Government to fully define the requirement to achieve a scale of £25bn in default arrangements. The more detailed secondary legislation needs to successfully ensure recognition of the potential for effective scale to be achieved by connected schemes using a common investment strategy designed and implemented on a provider’s platform.”
“Deciding how to use pension benefits is arguably the most complex but one of the most important financial decisions facing members of pensions schemes, often genuinely engaging with their pensions for the first time when looking to draw benefits. Pension scheme trustees are best placed to determine what the general needs of their typical member are, but a default retirement solution can never provide for the wide variety of different circumstances and needs of individual members.
“We do encourage the Government to quickly initiate the introduction of parallel requirements in workplace personal pension schemes so consumers have consistent opportunities and experiences regardless of the type of scheme they are in.
“Whilst a default solution may help a member avoid a poor outcome, we have to continue to strive to engage members before and through retirement and support them to make active decisions about drawing their benefits. We believe that the FCA’s targeted support proposals offer a fantastic opportunity to offer greater assistance to members as they face these important decisions and help them make better choices. We look forward to continuing our engagement with the FCA on how to shape the targeted support regime through the forthcoming consultation.”
