Pensions UK has today welcomed the passage through Parliament of the Pension Schemes Bill, marking a major step forward in reforming the UK’s workplace pensions system and strengthening outcomes for savers.
The Bill introduces a package of reforms that Pensions UK and its members helped to shape.
Significantly, and following sustained pressure from Pensions UK, others in the industry and Parliament, the power enabling the Government to determine how pension schemes invest is far narrower in scope than first drafted and tightly time limited. This is a victory for fiduciary duty and, ultimately, for savers whose investments will remain governed solely by trustees.
The legislation delivers a series of positive reforms that we expect to increase the value schemes can deliver and, in doing so, improve retirements for millions.
This includes a requirement on schemes to deliver incomes from pension savings at retirement, rather than leaving savers to make complex decisions by themselves. The Bill enables the automatic consolidation of small pension pots, saving money and making the system simpler to navigate for savers. And it underpins the new Value for Money framework, which should enable employers to choose schemes based on overall value, not just price.
The Pension Schemes Bill includes new rules to allow the release of surplus by Defined Benefit schemes, and establishes a clear legislative framework for commercial superfunds, providing greater certainty and oversight for schemes seeking to consolidate defined benefit liabilities, while maintaining protection for members.
Finally, the Bill supports further consolidation in the industry, with the aim of creating the right conditions for schemes to drive efficiencies and to bring investment expertise in-house, supporting more sophisticated investment approaches that are expected to deliver stronger long-term returns.
Strong industry voice throughout the Bill’s passage
The Bill reflects sustained engagement between Government, Parliament and the pensions industry. Pensions UK has played a central role throughout the Bill’s passage, working constructively with ministers, parliamentarians and officials to help ensure the final legislation is practical, proportionate and maintains confidence in the system.
Pensions UK’s work has supported the following changes during the passage of the Bill:
- A significant scale back of the mandation power allowing Government to direct how schemes invest, with changes built around the specific demands Pensions UK has made from the start of the Parliamentary process.
- Limiting powers relating to the Local Government Pension Scheme, preserving trustee fiduciary duty and scheme flexibility.
- On surplus release, providing greater clarity and flexibility around how well‑funded defined benefit schemes can make responsible use of surplus while protecting members’ interests.
- The abolition of the PPF administration levy, removing an unnecessary cost on schemes while maintaining the strength and security of the Pension Protection Fund.
- A legislative solution to the Virgin Media issue, resolving long‑standing uncertainty and protecting schemes and members from the risk of disproportionate and unintended consequences.
Julian Mund, Chief Executive of Pensions UK, said:
“The passage of the Pension Schemes Act is a victory for pension savers.
“The legislation enacts a series of critical reforms that will improve the value savers get from pensions and make the system easier to navigate for employers and savers.
“The power that enables Government to direct how schemes invest has been drastically scaled back, with amendments built around demands Pensions UK has made from day one.
“Pensions UK and its members have played a leading role in shaping this legislation in the round, from policy formation through to today, and now our attention will turn to two things. First, the regulations that will put these reforms into action. And second, working with the Pensions Commission so that the systemic change delivered by the Bill is accompanied by more savings overall – giving us the best chance of delivering the retirements people rightly expect.”
Jamie Jenkins, director of policy at Royal London, comments:
“The passing of the Pension Schemes Bill signals the biggest changes to pensions since automatic enrolment was introduced over a decade ago.
“While the Government has had to compromise in a few areas, the substance of the Bill remains largely unchanged since it was introduced almost a year ago. The UK pensions system will therefore transition to one with fewer, larger pension providers with much greater focus on scale for investment, and value for savers.
“The core changes in the Bill command broad consensus, but the devil will now be in the detail as to how the various elements will work, and how they can work in harmony. What lies ahead is a large-scale change programme that requires careful management and sequencing. With pensions tax changes underway in 2027, 2028 and 2029, and a Pensions Commission mulling a longer term strategy, a period of stability in pensions policymaking is now critical if we are to make the Bill a success.”
Claire Trott, head of advice at St. James’s Place, said:
“With the Pension Schemes Bill now passed, it is welcome that the proposed ‘mandation’ power has been constrained significantly, providing important reassurance that investment decisions will remain driven by savers’ best interests rather than Government direction. However, concerns remain about the new requirement for pension schemes to offer a default retirement solution for disengaged savers. While well intentioned, this risks cutting across wider efforts to encourage greater engagement and could blur the boundary between guidance and advice. We will continue to engage constructively with Government on how pensions policy can support UK economic growth while also helping individuals take an active role in decisions about their long‑term financial futures.”
Partner and Head of Pensions at global law firm Eversheds Sutherland, Jeremy Goodwin, responds:
“It went down to the wire, but it is good news that the Bill has now been passed. It contains the most significant pension reforms since the introduction of automatic enrolment. It expands the options available to defined benefit schemes by facilitating run‑on, supporting the productive use of surplus assets and placing the superfund regime on a statutory footing. It also signals the coming of age for the defined contribution (DC) workplace pensions market.
“In line with the government’s vision of creating fewer, larger DC schemes, the new scale requirements are expected to accelerate consolidation and lead to the emergence of a small number of DC megafunds. The introduction of guided retirement is designed to help members turn their DC savings into pensions, helping to bridge the gap for those who do not feel equipped to make complex retirement decisions on their own.
“Now the Bill has been passed, the focus turns to implementation. The first target implementation dates are fast approaching and important details are still to be set out in implementing regulations on which the government is due to consult in the months ahead. Although not all of the mechanics are yet settled, the overall direction of travel for the coming years is now clear. This sets the context within which we need to address the longer-term challenges being examined by the Pensions Commission, including how we ensure the automatic enrolment generation can afford to retire.”
Christian Pittard, Head of Closed‑End Funds, Aberdeen Investments, said:
“We’re very pleased to see the Government’s amendment to the Pension Schemes Bill, announced yesterday evening in the House of Commons, which means that qualifying private markets investments will be wrapper agnostic. This is a sensible, pragmatic step and a real victory for common sense.
“Aberdeen Investments has long argued that regulation should focus on what is being invested in, not the structure used to access it. Allowing investment trusts and REITs to qualify based on the nature of their underlying assets is exactly the kind of product‑neutral approach that enables better outcomes for pension savers.
“Investment trusts already play a vital role in financing infrastructure, digital connectivity, clean energy and the logistics backbone that underpins the wider economy. A framework that is focused on assets rather than structure will make it easier for pension schemes to deploy capital more effectively and at scale.
“With the established expertise, governance and transparency that exist in listed real estate and infrastructure vehicles, increased pension investment could help accelerate development, support economic growth and help modernise the UK and Europe’s built environment. We’re also grateful to Baronesses Bowles and Altmann for their tireless campaigning, which has been central to delivering this positive outcome.”
Gail Izat, Managing Director for Workplace and Retail Intermediary at Standard Life, said:
“Royal Assent of the Pension Schemes Act marks an important milestone for the pensions industry. While recent debate has understandably focused on the Government’s proposed mandation powers, the legislation goes far beyond this single issue, introducing a series of meaningful reforms that tackle some of the unintended challenges of auto enrolment and pension freedoms.
“By placing greater emphasis on scale, value for money and clearer guidance at retirement, the Act creates the conditions needed for the industry to deliver better, more sustainable outcomes for pension savers over the long term.”
Guided retirement
“Pension freedoms have given people greater choice and flexibility, but they have also placed more responsibility on individuals to manage longevity risk, make complex investment decisions and their income last throughout retirement.
“As greater clarity emerges on the delivery of Targeted Support, the Act takes an important next step by introducing Guided Retirement Options. These industry‑designed, ready‑made solutions will support customers who neither want to select their own investments nor seek full financial advice, by helping them to make better decisions at the point of decumulation and to avoid poor outcomes such as unsustainable withdrawals.
“Crucially, there is no one‑size‑fits‑all approach to decumulation and the development of retirement income defaults should complement, rather than replace, the range of options available to those who wish to take a more active role in planning their retirement.”
Small pots
“The Act establishes a clear framework for the automatic consolidation of small, dormant pension pots, tackling an unintended consequence of auto enrolment and a more mobile, modern labour market.
“Consolidation can deliver clear benefits for savers by reducing costs, lowering charges and making pensions easier to manage. Larger pots can also unlock wider investment opportunities and ultimately support better retirement outcomes.
“We support small pot consolidation and see an opportunity to extend its scope beyond auto enrolment to include all pension schemes. Broadening the impact and reviewing the 2030 timeline could help unlock the benefits of consolidation earlier, delivering quicker gains for savers and supporting the industry’s journey towards scale.”
Value for Money
“The Value for Money framework has the potential to raise standards across the market by making schemes and default funds more comparable using a broader set of metrics, including service quality and investment performance, not solely costs and charges.
“Now that the consultation period has closed, it is critical that the final framework strikes the right balance between investment outcomes and service standards, and that data requirements remain proportionate, particularly for multi‑employer schemes. Getting this right will be essential to ensuring that large, well‑governed schemes deliver genuine value for members.”
Scale and consolidation
“Allowing providers to consolidate savers into their primary default funds through contractual override will accelerate progress towards the Government’s ambition of creating DC mega‑funds.
“Many providers, including Standard Life, already invest at scale, but these changes will streamline default arrangements, drive efficiencies and ultimately benefit both savers and the wider UK economy.”
Next steps
“The Pension Schemes Act provides a platform for the next phase of pensions reform. The focus must now turn to effective consultation and successful implementation to ensure these measures translate into more secure and better retirement outcomes for pension savers.”
Malcolm Reynolds, Aptia’s UK President, said:
“We welcome the news that the Pension Schemes Bill has completed its passage through Parliament – particularly given the risk of delay ahead of prorogation. Getting it over the line is an important moment for the pensions industry.
‘But this very much marks the beginning, not the end. For administrators in particular, the Bill brings a wide range of implications to consider – from guided retirement and the small pots agenda, to more technical elements of the surplus reforms, including reporting requirements, tax treatment, and member communications. With most provisions not expected to take effect until 2027, the focus now turns to how this framework will be translated into practice.
‘We look forward to working closely with DWP on the forthcoming consultations on secondary legislation, helping to ensure that the final regulations are clear, workable, and capable of being implemented successfully across the market.”
Kate Smith – Head of Public Affairs at Aegon UK said:
“The new Pension Schemes Act 2026 has the power to transform the pension market for the better for millions of workplace pension savers. After tense rounds of ping pong between the Houses of Commons and Lords which lead to concessions on the controversial mandation clause 40, the Bill will receive Royal Assent shortly – just in time before this parliamentary session breaks up. Without the concessions, the Bill risked being reintroduced in the next parliamentary session and effectively beginning its journey again. Overall, we believe this is a good compromise.
“The Bill’s measures will create a pension market with fewer, larger, better governed and more transparent schemes with the ability to invest in private assets, including in the UK to support economic growth. We now look forward to seeing the draft regulations setting out how each measure will work in practice supporting the pension industry in its evolution towards 2030.”
Phil Parkinson, Mercer UK’s President and CEO said:
“The passing of the Pension Schemes Bill represents a huge step in the pensions sector and the significant reforms it will deliver, including progress on small pots, guided retirement, value for money and DB surplus, which should improve long-term outcomes for retirement savers and strengthen the UK pensions system.”
“It is reassuring the Government has listened and made robust concessions on asset allocation mandation, which reduce some of the risks included in earlier drafts. There is a fundamental principle around pension schemes investment decisions – trustees undertake investments in the best interests of the members, in line with fiduciary duty. The Government amendments yesterday mean it is now more closely in line with fiduciary duty and some key elements of the Mansion House Accord.
“We share the Government’s growth ambition to get more investment into the UK and have taken steps to increase investment in UK private markets. The priority now must be on the Government’s own commitment as part of the Mansion House Accord to build a credible pipeline of investable opportunities that can attract long-term pension capital.”
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