New ‘Pension Schemes Act’ could boost your retirement by £29k

Millions of workers across the UK could see their retirement savings increase by up to £29,000 thanks to new legislation. The Pension Schemes Act officially became law on the 29th April 2026, bringing major reforms to the UK's £2 trillion pension system. The government states that the new rules will drive down costs, boost investment returns, and benefit over 22 million people currently building a pension pot. The changes aim to ensure that every pound you save works harder for you, making a comfortable retirement a more realistic goal for the average worker.

Minister for Pensions Torsten Bell highlighted the necessity of the reforms for everyday savers when the legislation was passed: "Today is a landmark moment for the 22 million workers building up a pension pot across the UK,... For too long, our pensions system has been fragmented and rarely ensures that people's savings are working hard enough to support them in retirement."

He added: "The Pensions Schemes Act will change that by creating schemes that drive down costs, deliver higher returns, and give savers the security they deserve."

Why was the Pension Schemes Act passed?

Over the past decade, the successful introduction of automatic enrolment has brought 10 million more people into workplace pension schemes. However, the system has gradually become fragmented. There are currently almost 1,000 different defined contribution pension schemes in the UK, and savers often end up with multiple small pension pots as they move between jobs over their career, making it difficult to keep track of their money. The Pension Schemes Act is designed to fix these inefficiencies, creating larger, better-performing funds and ensuring that pension providers deliver genuine value for money to everyday savers.

How the Pension Schemes Act will impact you

The legislation introduces several key measures designed to simplify pension savings and boost retirement income. The most important changes include:

• Combining small pension pots - If you have several small pension pots from previous jobs, the new law will allow these to be brought together automatically. This will give you a much clearer picture of your overall retirement savings and prevent small pots from being eaten away by management fees.
• The 'Value for Money' framework - Pension schemes will now be legally required to prove they are delivering value for money. A standardised system will make it easier to compare different schemes, driving competition and protecting savers from being stuck in poorly performing funds.
• Creating 'megafunds' - The Act paves the way for multi-employer 'megafunds' holding at least £25 billion. These huge funds will have the scale to drive down management costs and invest in a wider, more profitable range of assets, including UK businesses and infrastructure.
• Clearer retirement options - Pension scheme managers and trustees will be required to offer clear default options for turning your savings into a retirement income, helping you secure a sustainable income when you stop working.

The government estimates that the combined effect of these measures will benefit an average earner by up to £29,000 by the time they reach retirement age. This projected boost comes from a combination of better investment performance, reduced management costs (which are passed back to the saver), and ensuring that pension pots are invested effectively for longer periods. Due to differences in average earnings, the Department for Work and Pensions calculates that an average male earner at the start of his career could see up to £31,000 more in his retirement fund, while a female earner could see an additional £26,000.

When will the changes be implemented?

While these sweeping changes will take time to fully implement, the passing of the Pension Schemes Act is a positive step for savers. The government has also confirmed an upcoming Pensions Commission, which will look at further ways to ensure tomorrow's pensioners remain on track for retirement.

You do not need to take any immediate action, however there is nothing stopping you from tracking your lost pensions from previous employers now, as well as checking the fees you are currently being charged. If you are unsure whether you are saving enough, use an online pension calculator to check your projected retirement income.