Shortly after the general election, the new Labour government announced the Pension Schemes Bill and outlined some relatively brief details about planned changes to pensions in the future.
This was part of a wider plan to review and reform the pensions industry, hopefully delivering better outcomes for savers and encouraging more investment in UK markets.
The government has already made some progress in this area as seventeen of the UK’s largest workplace pension providers recently signed the Mansion House Accord, agreeing to invest more in domestic markets.
Additionally, after completing the first stage of the pension landscape review and assessing the findings, the government bought the Pension Schemes Bill to the House of Commons on 5 June 2025.
The policies contained in the bill could affect the way you build your retirement pot and draw from your pensions in the future.
Read on to learn how the new Pension Schemes Bill could affect your retirement savings.
Your small pensions may be consolidated automatically
Since the introduction of auto-enrolment starting in 2012, employers have been legally obliged to enrol qualifying employees in a pension scheme and make contributions.
This was a positive step as it meant far more working people would have a pension of some kind. However, it’s up to your employer to decide which pension scheme they enrol you in and they don’t necessarily have to contribute to your existing pension.
This means that when you start a new job, you might pay into a different scheme, leaving your old pension behind. Throughout the course of your working life, this could mean you contribute to multiple pots, and it’s easy to lose track of some of these savings.
In October 2024, the Pensions and Lifetime Savings Association (PLSA) reported that there were an estimated 3.3 million lost pension pots in the UK, with an average value of £9,470.
Fortunately, finding these lost savings might be easier in the future as one of the measures in the Pension Schemes Bill is to automatically consolidate pots worth £1,000 or less with a larger pension.
This could mean you don’t lose track of old savings, and it’s easier to manage your retirement pot as you only deal with one scheme rather than several smaller ones.
Additionally, you can move old savings into a pension scheme that offers more investment options or potentially has lower fees, meaning you could maximise the growth you achieve.
That said, consolidating your pensions may not always be the most suitable choice, especially if certain schemes offer additional benefits you want to retain. Under the new rules, you will be able to opt out of automatic consolidation.
It may be useful to seek professional advice in the future to decide whether you should consolidate your old pensions or not.
The “value for money framework” could mean you see increased returns on your investments
One of the key aims of the Pension Schemes Bill is to improve the returns that savers generate on their pension investments. To achieve this, the government will introduce the “value for money framework”.
This involves a standardised test to assess the investment returns, as well as the fees and charges, to determine whether a pension scheme offers value for money to savers.
Any pensions that don’t pass the test will be required to consolidate with better-performing schemes. The hope is that this will lead to a streamlining of the industry, creating fewer schemes that offer more value to savers.
The bill will also introduce a new policy requiring local government pensions and multi-employer defined contribution (DC) schemes to be invested in a “mega-fund” – any fund that manages at least £25 billion in assets – by 2030.
This policy will further encourage consolidation of small pensions into larger schemes, which often have lower fees and may generate higher investment returns.
As a result of these changes, you might see more growth on your pension savings in the future.
However, it’s important to continually review your pensions and ensure they’re suitable for you as the investment options or fees could change when the new policies take effect.
You might have more options for generating a retirement income in the future
Building wealth is a crucial part of your retirement plan, but it’s equally important to consider how you will generate an income from your savings when you eventually stop working.
Hopefully, this might be easier in the future as all pension schemes will soon be required to offer a “default pension benefit solution” to generate an income in retirement.
Any providers who can’t offer this must recommend a different scheme for savers to move their wealth into when they retire.
This means that regardless of where you hold your pension savings, you should have an option for generating an income. That said, this default might not be the best choice for your unique situation and you may want to explore alternatives.
We can discuss this with you and find the most suitable way to generate an income and achieve your dream retirement.
Get in touch
As the government rolls out these new policies, we can help you understand how you might be affected.
Please get in touch or email us at advice@mlifa.co.uk for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.