30 April 2026
In landmark reforms to the UK pensions system, the Pension Schemes Bill has now received Royal Assent, aimed at boosting retirement outcomes for more than 22 million people.
Now enacted as the Pension Schemes Act 2026, the new legislation covers around £2 trillion in pension savings and is expected to benefit an average worker by up to £29,000 by the time they retire. The government says the changes will reduce costs, improve investment performance, and give savers a clearer view of their retirement income.
Key measures include the automatic consolidation of small pension pots built up as people move between jobs and helping workers keep track of their savings. Pension schemes will also be required to demonstrate that they offer value for money, with underperforming schemes facing greater scrutiny.
The Act paves the way for the creation of large multi-employer defined contribution ‘megafunds’ worth at least £25 billion, designed to drive down fees and support investment in UK businesses and infrastructure. It also introduces new default options for turning savings into retirement income and gives defined benefit schemes more flexibility to use surplus funds.
The reforms also set the foundation for an upcoming Pensions Commission, which will examine further steps to secure comfortable retirements for future pensioners across the UK.
All of this talk of Defined Benefits (DB) and Defined Contributions (DC) pension schemes can be unclear to some, please see below the key differences:
|
Feature |
DB Pension |
DC Pension |
|
Income saved |
Guaranteed for life |
Depends on contribution |
|
Risk |
The employer as they must pay the promised pension regardless of investment returns |
The individual as poor investment performance can reduce the pension pot |
|
Calculation |
Based on salary and years of service |
Based on accumulation of contributions and investment growth |
|
Flexibility |
Limited |
High flexibility in retirement options and portable when changing jobs |
|
Occurrence |
Public Sector, fewer private schemes |
Most common in the private sector |
As ever, we will be keeping a close eye on further developments with this. It is important to note that, these changes do not affect the current automatic enrolment pension rules that all UK employers must follow to remain compliant.
We are carrying out pensions focussed BeKnowledgeable webinar on 17 June 2026 to help you strengthen your knowledge, enhance accuracy, and maintain compliance in your day-to-day payroll practices. Book your place now.
There is also a newly released episode of our podcast Behind the Button with independent pension adviser, Richard Smith, who gives a very personal insight into why pensions are important.
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