Jessica O'ConnorMore than 20 million workers across the UK are set to benefit from sweeping reforms introduced today under the Government’s new Pension Schemes Bill.
In what ministers have hailed as a “transformative moment” for retirement savings, the legislation aims to make pensions easier to manage, deliver better returns, and funnel billions into the UK economy.
Unveiled today, Thursday 5th June, the Bill seeks to tackle long-standing issues in the pensions system by consolidating small pension pots, improving transparency on fund performance, and ensuring clearer options for those nearing retirement.
It forms a key part of the Government’s broader Plan for Change, which focuses on securing better financial futures for working people.
A central feature of the new law is the automatic consolidation of small pension pots – typically under £1,000 – that many workers accumulate as they change jobs throughout their careers.
These pots often go unmanaged and unmonitored, leaving savers in the dark about their true pension wealth.
By bringing these pots together into high-performing, certified schemes, the Government says savers will have a clearer view of their retirement finances and benefit from economies of scale that drive costs down.
The Bill also introduces a new performance framework for pension schemes.
For the first time, savers will be able to see how well their pensions are performing in real terms, helping them avoid years trapped in underperforming funds.
For those approaching retirement, the Bill mandates that pension providers offer default routes for turning savings into income.
This is intended to simplify what has often been a confusing array of options and help ensure more secure financial outcomes in later life.
Work and Pensions Secretary Liz Kendall said: “Hardworking people across the UK deserve their pensions to work as hard for them as they have worked to save, and our reforms will deliver a huge boost to future generations of pensioners.
“The Bill is about securing better value for savers’ pensions and driving long-term investment in British businesses to boost economic growth in our country.
“As part of our Plan for Change we’re helping people find work, stay in work, and ensuring that work pays them back to give them the secure income in retirement they deserve.”
Chancellor of the Exchequer Rachel Reeves added: “The Bill is a game changer, delivering bigger pension pots for savers and driving £50 billion of investment directly into the UK economy – putting more money into people’s pockets through the Plan for Change.
“The Bill will transform the £2tn pensions landscape to ensure savers get good returns for each pound they save, and drive investment into the economy.”
Further measures in the Bill include the creation of large “megafunds” – multi-employer pension schemes with assets of at least £25bn.
These are expected to reduce costs through scale and enable broader investment into infrastructure and innovation.
Additionally, the Bill will consolidate the Local Government Pension Scheme (LGPS) into six regional pools, increasing its capacity to invest in clean energy, housing, and local infrastructure.
Defined Benefit pension schemes will also see new rules that allow them to safely release part of a collective £160bn surplus.
This move aims to support employer investment plans while also benefiting pension scheme members.
Minister for Pensions Torsten Bell added: “We are ramping up the pace of pensions reform. Workers deserve to get better bang for each buck saved, and these sweeping reforms will make sure they do.
“Pension saving is a long game, but getting this right is urgent so that millions can look forward to a higher income in retirement.”
