Pension reforms in progress: the Pension Schemes Bill, value for money and the Pensions Commission

Workplace pensions in the UK are going through the biggest programme of change since automatic enrolment began in 2012. The Pension Schemes Bill before Parliament carries 12 separate policies affecting how your pension is run, rated and consolidated¹, and it sits alongside a wider pensions investment review aimed at boosting investment, increasing saver returns and tackling waste in the pensions system².

For an ordinary saver, the practical questions are fairly concrete. Will my pension be judged good or poor value, and what happens if it is judged poor? Will my small leftover pots be merged automatically? Can my provider move me to a different scheme without asking? And how much will I be expected to contribute in future? This page sets out what is actually changing, what each change means for your pot, and when each reform is scheduled to take effect.

What the Pension Schemes Bill changes for savers

The Pension Schemes Bill is the main legislative vehicle for the reform programme. As introduced it contained 12 policies¹. The ones that touch savers most directly are:

• Value for money reporting: trustees of defined contribution (DC) schemes will be required to report on the scheme's value for money¹.
• Small pot consolidation: individuals' small DC pension pots will be consolidated through multiple default consolidators¹.
• Contractual override: contract-based pension providers will be allowed to override a member's contract, to change the contract or transfer the member to a new arrangement, with measures to protect savers¹.
• Guided retirement: DC scheme trustees will have a duty to offer default retirement products to members, a policy known as guided retirement¹.
• DC megafunds: a minimum size will be set for multi-employer DC default pension funds, to create what the government calls DC megafunds¹.
• DB superfunds and surplus: a permanent legislative regime will be established for defined benefit (DB) superfunds, and trustees of well-funded DB schemes will be allowed to share surplus funds with sponsoring employers¹.
• Pensions Ombudsman: the bill would re-establish the Ombudsman's legal standing to enforce determinations in pension overpayment cases without needing a county court order¹.
• Terminal illness and dashboards: the definition of terminal illness used for the Pension Protection Fund and the Financial Assistance Scheme would extend from a life expectancy of six months or less to 12 months or less, and the government-backed pensions dashboard service would be enabled to display PPF and FAS information¹.

The bill also removes restrictions that prevent the Pension Protection Fund from reducing its annual levy¹. Separately, the Pension Schemes Act 2026 introduces a new law allowing inflation increases, known as indexation, on pension benefits built up before 6 April 1997 in schemes that enter the PPF⁹.

This is not the first recent pensions statute. The Pension Schemes Act 2021 already protects members from pension scams by helping trustees ensure transfers are made to safe and not fraudulent schemes, and introduced three new criminal offences¹⁰. It also allows for both public and private sector pensions dashboards¹¹. The current bill builds on that foundation, and much of its detail will follow in regulations and regulator rules rather than on the face of the Act.

Value for money assessments: how schemes will be judged

At the moment, judging whether a pension scheme is good value is largely a matter for its own trustees and, in practice, many employers. Research published in September 2026 found that 16 per cent of employers have likely never reviewed their workplace pension scheme for value for money, while 48 per cent reviewed it within the past 12 months¹².

The value for money framework is intended to change that. It comes out of the pensions investment review, which the government launched in August 2024, led by the Minister for Pensions, and whose call for evidence in September 2024 asked for views on consolidation, value for money, and investment in the UK¹³. The review's final report was published on 27 May 2025¹. The framework will require DC scheme trustees to report on value for money¹, and ratings are expected to run on a traffic-light scale from dark green, for strong value, to red, for poor value³.

The scale of the difference this is meant to expose is large. The Pensions Regulator has pointed to an example in which a £10,000 pot could be worth around £15,100 after five years in a high-performing scheme, 46 per cent more than in a weaker one³. The Regulator has also announced that pension value is to be put under the spotlight as part of the new regime³.

What "value" means here is broader than charges alone. The pensions investment review proposed reforms to deliver scale, accelerate consolidation and drive a focus on value over cost in the DC workplace pensions market¹⁴. In a DC scheme the value of your pot can go up or down depending on investment returns and the contributions made¹³, so a value for money judgement has to weigh net investment returns, costs and service quality together, not just the headline fee.

Where a scheme is rated poor value

A rating is only useful if something follows from it. Under the framework, if a pension offers poor value, firms and trustees must then fix it, by moving savers to better schemes or driving improvements³. For arrangements that stay poor value, the expected consequences include telling the regulators and limiting new members joining³.

In practice this means a poor rating is designed to be a trigger for action rather than just a label. A scheme that cannot or will not improve faces pressure on two fronts: existing savers can be moved elsewhere, and the flow of new members can be cut off. Over time that is intended to push the market towards larger, better-run schemes.

For savers, the protections around this process matter. If your employer goes out of business and you are in a trust-based DC scheme, you will still get your pension, but your pot might be reduced because administration costs are paid out of members' pots¹⁵. If you are considering moving pension money yourself, the normal transfer process applies: check your current scheme allows transfers out, make sure you will not lose any benefits, decide which scheme to transfer into, check whether you need to pay for financial advice, ask your current provider for a transfer value, and ask the new scheme to start the transfer¹⁶. Transferring a pot anywhere outside the rules, or taking it as an unauthorised lump sum, counts as an "unauthorised payment" and you will have to pay tax on it¹⁷.

Small pension pots to be combined automatically

Every time someone changes jobs and is enrolled in a new workplace pension, there is a chance of leaving behind a small pot. Over the years this has produced millions of deferred pots worth small amounts, each paying its own charges and each easy to lose track of.

The Pension Schemes Bill's answer is to consolidate individuals' small DC pension pots through multiple default consolidators¹. In September 2026 the Department for Work and Pensions published a consultation on automatic consolidation of deferred small pension pots through consolidator schemes under the Multiple Default Consolidator model¹⁸. The consultation seeks to establish a federated system of consolidator schemes for deferred DC pots under £1,000, overseen by a central body, with operation targeted from 2030¹⁸.

Consolidation itself is not new. Pension consolidation simply means bringing multiple pensions together by transferring them into one provider or scheme, and you can usually transfer or consolidate your pensions at any point unless the scheme rules list restrictions¹⁶. The reform changes who does the work: instead of each saver hunting down their own old pots, the system would sweep them into consolidators automatically.

The government expects this to save money as well as tidiness. The pensions investment review final report states that consolidation of pension providers could lead to reduced charges by up to 10 to 20 basis points over the longer term². A basis point is one hundredth of a per cent, so a reduction of that size works out to a small but real cut in the annual charges taken off your pot.

There are rules worth knowing about if you consolidate yourself. If you set up your own pensions, you can use the small pot rules to take up to three of them in one go without triggering the money purchase annual allowance; there are no such limits on pots set up by an employer¹⁹. In Scotland, the Scottish Government has proposed amending the Local Government Pension Scheme regulations to allow commutation of small pension pots for members who left the scheme before 1 April 2015²⁰.

Guided retirement: default options for taking your pension

Most people reach retirement with a pot of money and very little idea of what to do with it. At present, many simply cash out or buy whatever their provider offers first. The Pension Schemes Bill places a duty on DC scheme trustees to offer default retirement products to members, a policy known as guided retirement¹.

The idea is that instead of facing a blank menu, savers would have a sensible default path for turning their pot into retirement income, which they could follow or depart from. Research commissioned by the Institute and Faculty of Actuaries and published in September 2026 sounds a note of caution about design: it found that many proposed guided retirement defaults could be too complex and risk financial losses, and that models relying on active decisions risk savers drawing down too much or too little. It recommended "flex then fix" defaults and legal safe harbours for providers²¹.

Guidance is being refreshed alongside the policy. In June 2026 the Money and Pensions Service launched a new publication, "How to take your pension: a step-by-step guide", which replaces "Your pension: your choices", a key source of guidance since 2015. The new guide focuses on defined contribution pensions and is distributed by pension providers as part of a wider effort to support people at the point of retirement²².

Your provider can move you without your consent

One of the more surprising reforms for savers is the contractual override. The Pension Schemes Bill will allow contract-based pension providers to override a member's contract, to change the contract or transfer the member to a new arrangement, with measures to protect savers¹. The government describes this as a contractual override regime, with strong consumer safeguards, for the contract-based part of the market². Bulk transfers without consent for contract-based schemes are set to be introduced from early 2028 under the government's workplace pensions roadmap⁴.

Contract-based pensions are the personal and stakeholder pensions held with an insurer or provider rather than in a workplace trust. Until now, moving members of these schemes in bulk has generally required each member's agreement, which is one reason so many small deferred pots have stayed put.

If you hold a stakeholder pension, your existing rights are worth knowing: you can stop, re-start or change your contributions without penalty charges, and switch to a different pension provider without penalty charges²³. In some cases it is also possible to transfer to a new pension provider after you have started to draw retirement benefits¹⁷.

The safeguards around the override are the part that will determine whether it works for savers, and much of their detail will come in regulations. If a transfer under the new regime goes wrong, the Pensions Ombudsman deals with complaints, and the bill would re-establish the Ombudsman's legal standing to enforce its determinations in overpayment cases without needing a county court order¹.

Megafunds and larger workplace schemes: what it means for your pot

The pensions investment review's central argument is that UK pension schemes are too small to invest well. Its proposed reforms set minimum scale and investment capability requirements, with a transition pathway provided for schemes that will be able to reach scale by 2035¹⁴. The Pension Schemes Bill sets a minimum size for multi-employer DC default pension funds to create DC megafunds¹, and DC master trusts will be required to hold at least £25bn in assets under management in a main scale default arrangement from 2030⁷.

The market is already large. The combined market value of private sector DC and public sector defined benefit and hybrid schemes increased by £74 billion, or 8 per cent, between 31 March and 30 September 2025²⁴. The argument for scale is that bigger funds can access a broader range of investments and spread costs across more members. The review's final report also includes a reserve power which would, if necessary, enable the government to set quantitative baseline targets for pension schemes to invest in a broader range of private assets, including in the UK².

For an individual saver, the visible effects of this policy over the next decade are likely to be indirect: your scheme may merge into a larger one, your provider may change, and the investments your pot is held in may broaden. The Pensions Regulator's example of a £10,000 pot growing to around £15,100 in five years in a high-performing scheme, against less elsewhere, is the kind of gap the policy is meant to close³.

The Pensions Commission and the adequacy of retirement saving

The original Pensions Commission, chaired by Lord Turner in the mid-2000s, proposed the minimum auto-enrolment contribution of 8 per cent, made up of 4 per cent from employees, 1 per cent tax relief and 3 per cent from employers, with target replacement rates of 60 to 66 per cent of pre-retirement earnings for median earners and 50 per cent for higher earners⁸.

The government has now tasked the Second Pensions Commission with examining ways to secure the pension system's long-term future, its fairness, and pension adequacy⁵. It published its interim report in May 2026, which identified the issues that need to be resolved to achieve better pension outcomes⁵. The Work and Pensions Committee has separately recommended that the Government set out plans to build a consensus on what an adequate income in retirement would be²⁵.

Adequacy is the question behind almost everything else on this page: whether the amounts people are saving, combined with the state pension, will actually produce a livable retirement income. The Commission's work is where that question gets answered, and its recommendations are expected to shape contribution levels and scheme design for years to come.

Auto-enrolment contributions: 8% now, and the inquiry into raising them

Automatic enrolment requires employers to enrol eligible employees into a workplace pension scheme²⁵. Most employees who earn more than £10,000 a year are eligible, and your employer must automatically enrol you unless you are already in a suitable scheme²⁶. The system was introduced in 2012, with the full nationwide rollout completed in April 2019²⁷.

Minimum contribution rates were phased in, starting at a total of 3 per cent, increasing to 5 per cent in April 2018 and to the full 8 per cent in April 2019⁸. Today the minimum is 8 per cent of qualifying earnings, made up of 3 per cent from the employer and 5 per cent from the employee, including tax relief⁸.

Whether 8 per cent is enough is now an open question in two places. The Pensions and Lifetime Savings Association has proposed an increase in the minimum rate of auto-enrolment contributions to 12 per cent by the early 2030s, starting with an increase in the employer contribution rate to 5 per cent⁸. And in September 2026 the cross-party Work and Pensions Committee launched an inquiry examining how pension auto-enrolment could be reformed, including how the cost of any increase in contributions should be shared between employers and employees⁵.

The self-employed sit outside all of this, since automatic enrolment only reaches employees. Pension scheme participation among the self-employed has remained fairly stable at between 16 per cent and 20 per cent over the past decade, and was highest among those aged 45 to 59, at 25 per cent in 2023 to 2024²⁷. One proposal from the Committee's earlier work was to consult on increasing the main rate of Class 4 National Insurance paid by the self-employed by 3 per cent, with the option of having the increase paid into a pension if the person also contributes 5 per cent, including tax relief²⁸.

The original case for automatic enrolment was made in stark terms. The National Audit Office reported that 8 million people were expected to save for the first time or save more because of it²⁹, later revised to 9 million expected to be newly saving or saving more by 2018³⁰. It projected that by 2050 automatic enrolment would increase aggregate private pension incomes by £5 billion to £8 billion a year in 2011-12 earning terms, and reduce government spending on income-related benefits to the retired by £0.9 billion²⁹.

When each change takes effect

The reform programme stretches over more than a decade, and the dates matter for planning. Some are fixed in legislation, others are targets in the government's workplace pensions roadmap⁴.

The changes with confirmed dates include:

Two of these deserve a closer look. From 6 April 2027, unused pension funds and death benefits will be brought into the scope of Inheritance Tax, and from that date personal representatives will be liable to report and pay any Inheritance Tax due on unused pension funds or death benefits. All death in service benefits payable from a registered pension scheme will be excluded from the value of the estate⁶. Legislation already treats a member of a registered pension scheme as beneficially entitled, immediately before death, to "notional pension property" by reference to the scheme's arrangements³⁴.

The minimum age for accessing pension savings is currently 55, rising to 57 in April 2028⁵. If you plan to retire between 55 and 57 after that date, the change directly affects when you can reach your money.

Annual uprating continues alongside the reforms. The Pensions Increase (Review) Order 2026 came into force on 6 April 2026, providing a 3.8 per cent increase for pensions in payment, pro-rated for pensions that began on or after 7 April 2025³⁵.

How the reforms apply across the UK

Most of the Pension Schemes Bill applies to England, Wales and Scotland. Occupational pensions are a reserved matter in Northern Ireland, which means the bill's provisions generally do not extend there directly and separate Northern Ireland legislation is required¹. The Pensions Act (Northern Ireland) 2015 is maintained up to date with all changes known to be in force on or before 28 September 2026³⁶, and Northern Ireland typically mirrors GB pension law, though the timing can differ.

Scotland has its own variations in places. The Scottish Government's proposed amendment to the Local Government Pension Scheme regulations on small pot commutation is one example²⁰. The Pensions Regulator, the Financial Conduct Authority and the Pensions Ombudsman operate across Great Britain, with equivalent arrangements in Northern Ireland. How the regulators divide their responsibilities is covered in who regulates what.

Where to get help

Pensions are one of the areas of financial services where free, impartial help is genuinely available, and the reforms make it more useful than ever to use it.

• Pension Wise provides free guidance on your defined contribution pension options, including how the small pot rules work when taking whole pots¹⁹.
• The Money and Pensions Service publishes "How to take your pension: a step-by-step guide", focused on DC pensions and distributed by pension providers²².
• The Financial Conduct Authority sets out the transfer process for defined contribution pensions, including when financial advice is needed before a transfer¹⁶.
• The Pensions Ombudsman deals with complaints about pension transfers and scheme administration, and the bill would strengthen its power to enforce determinations in overpayment cases¹.
• nidirect provides official guidance for Northern Ireland on workplace, personal and stakeholder pensions, including transfers¹⁷.

Trust in pension companies remains a real issue while the reforms bed in. The FCA's Financial Lives Survey found pension companies had a mean trust score of 5.7 out of 10 in 2024³⁷. If you are unsure how a change affects you, the pensions guide explains how the different types of scheme work, and the scams and fraud guide covers the warning signs, including offers of free pension reviews and early access to your savings, which the transfer conditions regulations are designed to tackle³⁸.