Pension Schemes Bill becomes law - what it means for your retirement

The Pension Schemes Act 2026 has received Royal Assent, meaning it has now become law. 

The landmark legislation is set to bring major reforms to the UK’s pensions landscape as part of an overhaul of the £2tn retirement market. 

The changes, covering pension transparency, consolidation and investment strategy, promise to benefit more than 20 million workers - potentially adding up to £29,000 to the average pension. 

From salary sacrifice to the merging of small ‘dormant’ pots, Which? dives into the reforms to explain exactly how they will affect your savings and your retirement.

What is the Pension Schemes Act?

The Pension Schemes Bill was introduced to Parliament in July 2025 and became law on 29 April 2026.

This legislation - now called the Pension Schemes Act - includes reforms to how workplace and private pensions operate, with the aim of helping workers better plan for retirement by making pensions simpler, easier to manage and more valuable over the long term.

The government says that measures in the Bill mean the average worker who saves into a pension over their career could end up with an extra £29,000 by the time they retire, thanks to increased investment performance and reduced costs. 

Minister for Pensions, Torsten Bell, said: 'For too long, our pensions system has been fragmented and rarely ensures that people’s savings are working hard enough to support them in retirement.

'The Pensions Schemes Bill will change that by creating schemes that drive down costs, deliver higher returns and give savers the security they deserve.’

• Find out more: how much will I need to retire?

Five key reforms in the Pension Schemes Act

Here's how the new Act could have an impact on your pension: 

1. Small pots consolidation

To tackle the issue of millions of tiny, forgotten pension pots, the Act creates a system of ‘authorised default consolidators.’ This will see deferred pension pots worth £1,000 or less automatically moved and merged into a single larger pot managed by a certified consolidator.

The person who owns the savings will be contacted and will have the option to opt out and transfer their funds elsewhere or carry on with the new scheme.

Which? has been working with the government and a wide range of stakeholders for almost a decade on how to address the proliferation of small pots, leading the government sub-group to tackle this issue, so it’s great to finally see this made into law.

• Find out more: should I combine my pensions?

2. ‘Value for Money’ framework

A new standardised framework has been established for defined contribution (DC) pension schemes. The new rules mean trustees and managers are now required to report on their scheme’s value for money based on three pillars: investment performance, costs/charges and service quality. 

Schemes will then be assigned a rating - for example, fully delivering or not delivering, based on their performance. 

If a scheme is doing a poor job, the Pensions Regulator (TPR) can force it to merge with a larger, more successful one to ensure savers get better value or close it to new members. 

Under the framework, schemes will be better able to compare themselves against their peers, with those falling short made public. The government says this will drive competition and a long-term focus on value across the DC pensions sector.

• Find out more: how to boost your pension

3. More help at retirement

Trustees of DC schemes now have a legal duty to provide savers with a guided pathway or specific product to help turn their pot into a regular income. 

If workplace pension savers want to do something different, they will have to opt out of the default.

• Find out more: options for accessing your pension

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4. Pension megafunds

The creation of 'mega funds' will bring together smaller multi-employer pension schemes so that these larger funds can benefit from their scale, leading to reduced costs. 

The government also now has a 'reserve power' to tell these funds where to invest the money. 

This part of the law was debated heavily, and new limits were added as a result. The government can now only direct up to 10% of a fund's total money, and no more than 5% can be forced into UK-based investments.

However, schemes can ask for an exemption if they think this type of investment would hurt your savings.

• Find out more: how multi-employer pension schemes work

5. New process for overpayment disputes

In the past, if a pension scheme accidentally overpaid a member and there was a disagreement on this, the pension scheme would need to go to court to get a special order before it could take the money back from the member's future payments. 

However, from 29 June 2026, pension schemes will no longer need to go to a court if they already have a decision from The Pensions Ombudsman (TPO). The Ombudsman’s decision will be enough to let the scheme start recovering the money.  

• Find out more: how financial advice can help with your pension planning