The government published the final report of its Pensions Investment Review on 27 May 20251. The review was launched by the Labour government in August 2024, following the general election in July1. The government also published two consultations alongside the review in November 2024: Unlocking the UK pensions market for growth, and Local Government Pension Scheme in England and Wales: Fit for the future1.
The consultation on unlocking the UK pensions market ran from 9:30pm on 14 November 2024 to 11:59pm on 16 January 2025, and applies to England, Scotland and Wales2. Its response, added on 29 May 2025, sets out the government's final policy positions2. The reforms include setting minimum scale and investment capability requirements, with a transition pathway for schemes that will be able to reach scale by 2035; a regulatory approval process for creating new default arrangements; a contractual override mechanism for the bulk transfer of assets, where it is in savers' interests; and a commitment to a market fragmentation review, to commence in 20292. The government decided not to further explore measures proposed to affect the role of employers or advisers in the DC workplace market at this time, and not to introduce reforms regarding differential pricing2.
"Legislation to implement the reforms will form part of the forthcoming Pension Schemes Bill."
The Pension Schemes Bill 2024-25 is a government bill, bill 255 of the 2024-25 parliamentary session1. It was introduced on 5 June 2025, with second reading scheduled for 7 July 20251. According to the government's impact assessment, the bill as introduced had 12 policies1. Most of the bill applies to England, Wales and Scotland; occupational pensions are a reserved matter in Northern Ireland1. On 5 June 2025 the government published Workplace pensions: a roadmap to accompany the bill and set out the proposed sequencing and timing for implementing the legislative package1.
The measures in the bill cover several areas1:
| Area | Measures |
|---|---|
| Local government pension scheme | Consolidate LGPS funds into LGPS megafunds |
| Defined benefit schemes | Allow trustees of well-funded DB schemes to share surplus funds with sponsoring employers; establish a permanent legislative regime for DB superfunds |
| Defined contribution schemes | Require trustees to report on value for money; consolidate small DC pots through multiple default consolidators; set a minimum size for multi-employer DC default funds to create DC megafunds; allow contract-based providers to override a member's contract, with protections for savers; place a duty on trustees to offer default retirement products, known as guided retirement |
| The Pensions Ombudsman | Re-establish legal standing to enforce determinations in pension overpayment cases without a county court order |
| Pension Protection Fund and Financial Assistance Scheme | Extend the terminal illness definition from a life expectancy of six months or less to 12 months or less; remove restrictions preventing the PPF from reducing its annual levy; enable the pensions dashboard service to display PPF and FAS information |
The local government pension scheme in England and Wales is the largest funded public service pension scheme1. The Financial Assistance Scheme provides financial assistance to members of DB schemes who lost all or part of their pension if their scheme came to an end between 1 January 1997 and 5 April 20051. The Commons Work and Pensions Committee took evidence on the bill before its introduction, in a session on 14 May 20251.
Why it matters for households
The bill's measures would affect members of workplace pensions across England, Wales and Scotland, and members of the Local Government Pension Scheme in England and Wales in particular, where funds would be consolidated into megafunds1. Members of defined benefit schemes could see surplus funds shared with sponsoring employers, and a permanent regime for superfunds would replace interim arrangements1. For members of defined contribution schemes, small pots could be consolidated through default consolidators, and trustees would have a duty to offer default retirement products known as guided retirement1. The changes to the Pensions Ombudsman would affect how determinations in overpayment cases are enforced1. The extension of the terminal illness definition for the Pension Protection Fund and Financial Assistance Scheme would change who qualifies on life expectancy grounds1. The government has not reported the dates on which individual measures would take effect; the roadmap published on 5 June 2025 sets out proposed sequencing and timing1.
What happens next
Second reading of the Pension Schemes Bill 2024-25 is scheduled for 7 July 20251. The government's response to the consultation on unlocking the UK pensions market states that legislation to implement the reforms will form part of the forthcoming Pension Schemes Bill2. The commitment to a market fragmentation review is to commence in 20292.
Sources2 cited
- Pension Schemes Bill 2024-25 - House of Commons Library commonslibrary.parliament.uk
- Pensions Investment Review: Unlocking the UK pensions market for growth - GOV.UK gov.uk
Pension WiseFree guidance on your options for a defined contribution pension, from age 50
FSCSProtects your money if a bank, insurer or investment firm fails
GOV.UKOfficial information on tax, benefits and government services