By Clare Yates
5 min read
The new Pension Schemes Act 2026 introduces a range of changes designed to help people manage their pensions more easily and make better retirement decisions. Although the Act is now law, many of the changes will be rolled out over the coming years.
The government says the reforms could boost the average pension pot by up to £29,000 over time.
Key points from the new Pension Schemes Act
Here’s a look at some of the biggest changes and what they could mean for you.
Small pension pots could be combined automatically: Pension pots worth £1,000 or less may eventually be merged together to help reduce forgotten pensions.
Pension ‘megafunds’ could change how your money is invested: The government says combining smaller pension schemes could lower costs and improve investment opportunities.
Pension schemes will be easier to compare: A new “value for money” framework will assess schemes on performance, charges and service quality.
Retirement income guidance should improve: Pension schemes will need to offer default retirement income options - and clearer communications on products such as income drawdown and pension annuities.
Pension disputes could be resolved faster: The pensions ombudsman will gain powers to settle disputes without court action being needed first.
Let’s take a look at what the above changes could mean for you.
Small pension pots could be merged
If you've worked for a few different employers over the years, there’s a good chance you’ve built up more than one pension pot along the way. The problem is that smaller pension pots with companies you no longer work for can easily get forgotten about.
Under the new law, pension pots worth £1,000 or less could be automatically combined into one larger pot. The aim is to make pensions easier to keep track of and reduce the impact of charges on smaller balances.
You’ll be contacted before any transfer happens and will be able to opt out if you’d rather move the money somewhere else.
There are said to be around 4.8 million lost pension pots in the UK, so this could help plenty of people reconnect with retirement savings they’ve forgotten about. However, these automatic consolidations aren’t expected to be fully in place until around 2030.
Pension ‘megafunds’ change how your money is invested
One of the biggest talking points from the new law is the move towards larger pension investment funds, often being called pension “megafunds”.
The government believes combining smaller schemes into bigger funds could reduce costs and give pension providers access to a wider range of investments, including infrastructure projects and UK businesses.
The legislation also gives the government limited powers to influence where some pension money is invested. In certain situations, up to 10% of a fund’s investments could be directed, although no more than 5% could be required to stay in UK-based investments.
Industry experts commented that larger schemes could bring real benefits for savers if they lead to lower fees, broader investment opportunities and better service. However, Tom Selby from AJ Bell warned that bigger funds do not automatically mean better outcomes and said pension savers’ interests should remain the priority.
It should become easier to compare pensions
Crunching the numbers to decide whether your pension is performing well or not can feel like a daunting task. That’s why the new legislation introduces a standard “value for money” system for pension schemes.
Schemes will be assessed on things like:
Investment performance.
Charges and fees.
Service quality.
The idea is to make it easier for savers to compare pensions and understand whether they’re getting good value. The difference between a poor-performing pension and a strong one could potentially add up to hundreds of thousands of pounds by the time you reach retirement, so this change could make a huge difference for many people.
The government also hopes it will encourage pension providers to improve standards across the industry.
Retirement choices should become clearer
It can be tricky knowing where to start when it comes to working out how to turn pension savings into a reliable retirement income. So, under the new rules, defined contribution pension schemes will be required to set out retirement income options for members in a much more structured way, rather than leaving people to make all the decisions themselves.
This includes offering a default retirement income solution, which is a ready-made option designed to help convert pension savings into regular income. Schemes will also need to give clearer and more timely information explaining the different ways pension savings can be taken, including drawdown, annuities, or a mix of options.
The aim is to reduce the risk of savers either withdrawing too much too quickly or being too cautious and not making the most of their pension savings. Overall, the changes are intended to make retirement decisions easier to understand and more structured, so savers feel more confident about how their income will last throughout retirement.
Pension disputes could be sorted more quickly
The new law also changes the way disputes are handled when a pension scheme believes it has overpaid to a scheme member. From 29 June 2026, the pensions ombudsman will have stronger powers to resolve disputes without pension schemes needing to go through the courts first.
Previously, schemes often needed a court order before recovering overpaid money from future pension payments. It means savers will have a faster and cheaper way to resolve disputes. The government says the reforms should also reduce delays and lower legal costs.
What does it all mean for savers?
Most of these changes will take time to fully roll out, but the overall goal is fairly simple – making pensions easier to manage and easier to understand.
For savers, that could mean fewer lost pensions, clearer information and more support when making retirement decisions. And with so many people building up multiple pension pots during their working lives, anything that makes retirement planning feel less complicated will probably be welcomed.