The Pension Schemes Bill is set to reshape the £2trn (€2.3trn) UK pensions sector by driving larger, more efficient schemes, increasing investment in UK infrastructure and improving outcomes for savers, after receiving Royal Assent on 29 April.
The legislation, which began its lengthy parliamentary journey in June 2025, becomes law following a prolonged process that has left a number of key provisions significantly amended. It is expected to accelerate consolidation across both defined benefit (DB) and defined contribution (DC) provision, alongside reforms spanning governance, investment strategy and retirement adequacy.
A central and controversial element is the reserve power (also known as ‘mandation’ power), which would allow the government to mandate minimum asset allocation targets for DC default funds if voluntary market outcomes are deemed insufficient.
Following extensive debate between the House of Commons and the House of Lords, the provision has been significantly diluted.
The power is now capped at 10% of default fund assets and 5% of UK-based assets, with a sunset clause brought forward from 2035 to 2032. It also includes an exemption where forced allocation would result in material financial detriment to members.
In addition, the Act requires The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) to assess barriers to private market investment, including whether these reflect a collective action problem. The reserve power cannot be exercised before 2028.
Another contested area was the scale requirement underpinning DC consolidation. The House of Lords initially backed an amendment allowing regulators to waive scale requirements where consolidation could not be shown to improve member outcomes, but this was rejected by the House of Commons.
The government’s £25bn consolidation agenda therefore remains in place, with further consultation expected on implementation.
The Act also covers guided retirement, small pots consolidation, Value for Money requirements, DB surplus extraction and Local Government Pension Scheme (LGPS) pooling.
The legislation has been widely described as a “game changer” for UK pensions, given its potential to reshape governance, scale and investment allocation across the sector.
Implementation takes centre stage
Richard Knight, head of the pensions and lifetime savings team at law firm Burges Salmon, said: “Royal Assent today marks a significant legislative milestone for the Pensions Schemes Bill. It is a huge achievement for both the government and the industry, the latter having played such an instrumental role in shaping and improving the measures in the Act.”
Knight added that implementation work now takes centre stage: “While some key measures, including the section 37 remedy, come into force immediately, many others await secondary legislation to bring them into operation and form part of an ambitious programme of reform spanning the next four years and beyond.”
He noted that, for much of the Act, the focus now “shifts from the big picture to the detail, as we turn to implementation and await the secondary legislation that will determine how these reforms will operate in practice”.
Julian Mund, chief executive officer of Pensions UK, called the legislation a “victory” for savers.
“The power that enables government to direct how schemes invest has been drastically scaled back, with amendments built around demands Pensions UK has made from day one,” he noted, adding that attention now turns to regulation and the work of the Pensions Commission to ensure systemic change is matched by higher levels of savings.
Nausicaa Delfas, TPR’s CEO, said the Act presents a “once in a generation” opportunity to improve outcomes. “We will be working closely with government and industry to implement these changes successfully, so people can get the best possible retirement outcomes.”
Calum Cooper, head of pensions policy at Hymans Robertson, said outcomes will depend heavily on secondary legislation. Getting the detail right will be critical to ensuring schemes, trustees and employers can engage with confidence, while safeguarding better member outcomes.
“This is a rare opportunity to turn pensions into a more effective force for good. The focus must now shift to the next phase of reform, with pragmatic, well-sequenced regulation that enables schemes and employers to act with confidence and ambition.”
