The Pensions Schemes Act 2026, which received Royal Assent on 29 April 2026, introduces some of the most significant reforms to the UK pensions landscape in over a decade. The Government estimates the changes could increase the average worker’s retirement savings by up to £29,000 over their lifetime.

The Act focuses on scale, efficiency, transparency, and long‑term investment, reshaping how Defined Contribution (DC), Defined Benefit (DB), and Local Government Pension Scheme (LGPS) assets are managed.

1. Automatic Consolidation of Small Pension Pots

Auto‑enrolment has created millions of small, inactive pension pots. The Act introduces automatic consolidation, meaning:

• Small pots will be merged into a saver’s chosen or default scheme
• Savers will have fewer accounts to track
• Schemes benefit from reduced admin costs and greater investment efficiency

This aims to reduce “lost” pensions and improve long‑term outcomes.

2. A New Value for Money (VFM) Framework

A mandatory Value for Money framework will standardise how DC schemes report:

• Investment performance
• Costs and charges
• Service quality

The goal is to improve transparency, enable like‑for‑like comparisons, and push underperforming schemes to improve or exit the market.

3. Creation of £25bn+ Multi‑Employer DC “Megafunds”

The Act paves the way for large‑scale, multi‑employer DC schemes with minimum assets of £25 billion. These “megafunds” are expected to:

• Reduce investment and administration costs
• Provide access to private markets and infrastructure
• Support investment in UK growth sectors
• Improve long‑term returns for members

Scale is the central theme: bigger schemes, better buying power.

4. LGPS Asset Consolidation

Local Government Pension Scheme assets will be consolidated into FCA‑regulated investment pools. This is intended to:

• Improve governance and efficiency
• Reduce duplication of investment costs
• Support long‑term investment in local infrastructure, housing, and clean energy

The Government sees LGPS consolidation as a lever for regional economic growth.

5. Greater Flexibility for DB Scheme Surpluses

Defined Benefit schemes will have new options for using surplus funds, subject to safeguards. Potential uses include:

• Employer refunds
• Member benefit improvements
• Transfers to consolidation vehicles

This flexibility is designed to encourage sustainable long‑term funding strategies.

6. A New Pensions Commission

The Act sets the stage for a future Pensions Commission, which will examine:

• Whether savers are on track for adequate retirement incomes
• Auto‑enrolment contribution levels
• State Pension sustainability
• Intergenerational fairness

This signals further reform ahead.

FAQs: Pensions Schemes Act 2026

What is the Pensions Schemes Act 2026?

It is a major reform package aimed at improving pension outcomes through consolidation, transparency, and long‑term investment.

When did the Act come into force?

The Act received Royal Assent and came into force on 29 April 2026.

How could the Act benefit savers?

Government estimates suggest the average worker could be £29,000 better off by retirement due to lower costs and improved investment performance.

What are “megafunds”?

Large multi‑employer DC schemes with £25bn+ in assets, designed to reduce costs and access a wider range of investments.

Will my small pension pots be merged automatically?

Yes — the Act introduces automatic consolidation to reduce fragmentation and improve efficiency.

What does the Act mean for DB schemes?

DB schemes gain new flexibility to use surplus funds, subject to regulatory safeguards.

What is the new Pensions Commission?

A forthcoming body that will review the long‑term adequacy and sustainability of the UK pension system.