The Pension Schemes Bill: A Framework for the Future of Pensions

A foundation for long-term reform

The Bill aims to reshape the pensions landscape around a few core principles:

• improving value for money (VfM) and outcomes for savers,
• building scale and efficiency in the Defined Contribution (DC) market,
• unlocking surplus flexibility and innovation for Defined Benefit (DB) schemes, and
• encouraging productive investment to support economic growth.

It responds to the long-running challenges of a fragmented DC market, complex DB endgames and uncertainty about how members convert savings into income. Yet, the real change will depend on how regulators fill in the gaps over the next year or so.

We see the Bill as the scaffolding, with the detailed structure still to be built.

Key reforms at a glance

For DB schemes, the Bill proposes a new surplus regime that could allow trustees and employers to share or release surplus funds, once schemes are securely funded. It also sets out a framework for DB superfunds, giving more structure to consolidation options and potential endgame routes.

For DC schemes, reforms will centre on VfM, small-pot consolidation, and default decumulation solutions. In practice, DC trustees will need to ensure that schemes deliver VfM which doesn’t just mean low costs and charges. It also means that savers get good value from their investments and receive a quality level of service. It also sets out a long needed, clear path to an income in retirement for those who do not (or cannot) make their own choice.

On investment and scale, the Bill supports larger, better-governed schemes capable of investing more effectively, including in productive finance such as infrastructure and private markets. Smaller schemes will face growing pressure to consolidate if they cannot demonstrate strong governance and good member outcomes.

The Bill also includes a ‘last resort’ reserve power which will allow the Government to set binding asset allocation targets, if the industry does not make progress in deploying assets to UK private markets. However, pension schemes must be allowed to direct pension assets in members’ best interests, without a mandatory requirement to invest in specific markets or assets. This is something that has and continues to have the most debate.

Opportunities and risks

For DB schemes, the potential to use or share surplus could unlock new opportunities, whether for benefit improvements, employer engagement, or broader investment. But this comes with fiduciary risk. Trustees will need clarity on when a scheme is “safely funded” and how members’ interests are protected before any surplus is touched.

For DC schemes, the challenge is scale. The combination of VfM metrics and consolidation measures could accelerate mergers or transfers, raising governance and communication challenges. Default decumulation duties will require schemes to think more about how their members access income in retirement. However, a default retirement solution can never provide for the different circumstances and needs of individual members.

The Bill’s investment agenda, especially around productive finance, will need careful handling. Trustees must continue to act in the best financial interests of members, even as policy steers towards long-term growth assets that may be illiquid or complex.

In summary

The Government has indicated an ambitious timescale for the introduction of the Bill’s measures which gives the industry little time to implement them.

The Pension Schemes Bill marks the start of a major evolution in the UK’s pension system, but it’s a framework, not the final word. For the pension industry, the focus now should be on awareness, readiness, and strategy: ensuring schemes are well-governed, well-prepared, and positioned to deliver better member outcomes once the fine print arrives.

We will provide further information as consultations and regulations progress and also in our quarterly regulatory roundup.