The Pension Schemes Act 2026: What the changes mean for employers

Understanding the latest workplace pension reforms and what they could mean for your business.

The Pension Schemes Act 2026 has now received Royal Assent and is law. It introduces major reforms that are expected to reshape UK workplace pensions over the coming years. The Act provides an overarching framework, with each area requiring further development to clarify the specifics necessary for implementing the proposed changes. For employers, staying informed matters not only from a governance and compliance perspective, but also because the changes could affect scheme design, provider choice and the retirement outcomes your employees receive. This article explains the Act’s main themes and what they could mean for employer-sponsored pension schemes.

Why the Pension Schemes Act matters to employers

Since the rollout of automatic enrolment, workplace pensions have become a key part of employee benefits and regulatory obligations. The Pension Schemes Act 2026 marks the next major stage in that evolution. Its broad direction is clear: fewer but larger workplace pension schemes, a stronger focus on value for money, and better outcomes for savers as they access their pension savings.

Much of the detail will still come through secondary legislation, regulatory rules and guidance but the direction of travel is clear. For employers, now is a good time to understand the likely impact on your scheme and keep in close contact with advisers, trustees and providers as the regulations develop.

Fewer, larger pension schemes: What does this mean?

A central theme of the Act is scale. The government wants to encourage the development of large, multi-employer defined contribution (DC) pension schemes — sometimes called ‘megafunds’. Over time, schemes used for automatic enrolment will be expected to meet minimum size requirements for their main default arrangements, with both contract-based pensions and Master Trusts in scope.

The Act sets up the framework for these changes, with the policy direction pointing to a minimum of £25 billion in the relevant default arrangement by 2030 for qualifying schemes. It also provides for a transition pathway for some multi-employer DC schemes that have already reached a significant scale and can show a credible plan to grow further. While these are not immediate employer action points, they are likely to shape the provider market over the rest of the decade.

The government’s view is that larger schemes can deliver stronger governance, broader investment opportunities and better long-term value for members. For employers, this means it may become increasingly important to understand how future-ready your chosen workplace pension scheme is, potentially reviewing providers or alternative option with the help of your scheme adviser.

Value for money: delivering more than just cost savings

The Act also creates the framework for a statutory Value for Money (VfM) regime for DC workplace pensions. This goes beyond charges alone. The intention is that schemes will be assessed more consistently on investment performance, service quality and the outcomes they are helping to deliver for your employees at retirement.

While this won’t require direct action from employers themselves, there could be an indirect impact from the regulator’s closer scrutiny of their chosen pension scheme.   Schemes that consistently fail to deliver good value for money could ultimately be required to wind up and transfer members to better-performing arrangements. This is expected to accelerate consolidation and raise the bar for the quality of default investment strategies.

The Act also lays the groundwork for other member-focused reforms, including the automatic consolidation of small deferred pension pots and clearer default retirement income options for members who do not actively choose how to take their benefits.

For employers, the practical takeaway is that provider quality, governance standards and member outcomes are likely to come under more focus over time. It might be a good time to review your workplace pension arrangement, speak to your adviser or provider about how the scheme is preparing for the Act’s changes and whether any future adjustments may be needed.

How Royal London can help

At Royal London, we’re here to support you in navigating these changes and ensuring your workplace pension scheme delivers the best outcomes for your employees. By staying informed and taking proactive steps, you can ensure your scheme continues to meet the needs of your employees while complying with new regulations.

If you have any questions, please speak to your usual Royal London contact.