More than 20 million workers across the UK are expected to benefit from higher retirement savings. Potential increase in retirement savings is introduced in major new pensions legislation, which became law on Wednesday 29 April 2026.
The newly enacted Pension Schemes Act marks a significant overhaul of the UK’s £2 trillion pensions system. The reforms are designed to improve value for savers, reduce costs, and increase long-term investment returns. These changes may boost the average worker’s pension by up to £29,000 by retirement.
What is changing?
A key feature of the Act is the requirement for pension schemes to demonstrate clear value for money. It also introduces automatic consolidation of small pension pots, helping individuals who change jobs frequently to keep better track of their savings by bringing multiple pots together into one.
In addition, the legislation establishes a new Value for Money (VFM) framework to protect savers from underperforming schemes. Pension providers will also be required to offer straightforward default options for converting savings into retirement income, supporting more stable and sustainable financial outcomes in later life.
The reforms aim to reshape the pensions landscape. They will ensure savings work harder over time while also encouraging broader investment in the UK economy. Key measures include:
- Automatic consolidation of small pension pots
- A standardised VFM framework to improve transparency, comparability, and competition across defined contribution (DC) schemes
- The creation of large multi-employer “megafunds” worth at least £25 billion, enabling lower costs and wider investment opportunities, including in UK infrastructure and businesses
- Consolidation of Local Government Pension Scheme assets into pools managed by FCA-regulated firms, supporting investment in housing, infrastructure, and clean energy
- Greater flexibility for Defined Benefit schemes to release surplus funds, potentially unlocking around £160 billion to support employers and scheme members
Together, these changes could increase retirement savings by up to £29,000 for an average earner over the course of their career.
The Act also lays the groundwork for a forthcoming Pensions Commission. The Commission will assess whether future retirees are on track for a comfortable retirement. It will also propose further reforms that could benefit millions more.
Additional details
- The estimated £29,000 boost is based on improved investment performance, lower costs, greater diversification, and longer investment periods
- Current average full-time earnings are just over £37,000 per year for men and just under £32,000 for women
- Under the new measures, an average male earner starting their career could see pension savings increase by up to £31,000, while an average female earner could see an increase of around £26,000