A report setting out the key changes in the Pension Schemes Act 2026 and the impact on DB and DC pensions.
Published: 27 May 2026
Author: Rhiannon Barnsley-Bloomfield
The Pension Schemes Act 2026, which received Royal Assent on 29 April this year, marks a decisive shift in how UK pensions are governed, funded and expected to perform.
What is the background to the reforms?
The Act was originally introduced as the Pension Schemes Bill on 5 June 2025. It is intended to bring about “major reform to the UK pensions system”. The Act “paves the way” for the upcoming Pensions Commission which will explore adequacy and retirement outcomes.
There are multiple provisions aimed to reform defined contribution (DC) pensions, make it easier to extract surplus from well-funded schemes and address the issues arising from the judgement in Virgin Media Ltd v NTL Pension Trustees II Ltd.
Changes to extracting surplus
Subject to certain restrictions, the trustees of a pension scheme will be able to amend the scheme rules to:
- introduce a power for the trustees to make payments to the employer of the scheme out of scheme funds where no power currently exists, and
- remove or relax any restrictions imposed by the scheme rules on any existing power to make payments to the employer of the scheme out of scheme funds.
According to the government’s roadmap, it anticipates the surplus regulations and guidance will come into force by the end of 2027.
Please see our article for further details on the background to the reforms and the restrictions on the use of the new power.
Virgin Media Remedy
The Virgin Media remedy, aimed at addressing uncertainty following the judgement, came into force on 29 April 2026.
Scheme actuaries are permitted, subject to certain conditions and exemptions, to give retrospective written actuarial confirmation in relation to historic amending deeds which will treat amendments as having been validly made insofar as the contracting-out requirements are concerned.
Please see our article for information on the issues caused by the judgement, and how the remedy will work in practice. We have also published an article on The Pension Regulator’s (TPR) guidance for trustees considering making use of the remedy.
DC Provisions
The are several changes affecting DC schemes:
- new requirements for DC multi-employer schemes, such as master trusts and group personal pensions (GPP), to operate a main scale default arrangement (MSDA) which has at least £25 billion in assets under management from 2030 otherwise the schemes will no longer be qualifying schemes for auto enrolment purposes
- a new contractual override for schemes regulated by the Financial Conduct Authority (FCA). Providers will be able to make “unilateral changes” to schemes, including amending terms or transferring members to a different scheme operated by the same provider or a scheme operated by a different provider without consent from members
- legislative powers to mandate the VFM framework for trust-based schemes with DC benefits which intends to shift the focus from cost to value
- requirements for automatic enrolment schemes to transfer small pension pots to authorised consolidators if they are £1,000 or less in value (but not nil), and have had no contributions paid into them or any active investment decisions made in respect of them in the last 12 months, and
- a requirement for trustees of DC schemes to develop ways for members to receive their pension without the member having to make complex choices about how they want to receive those benefits.
Please see our article for further details about each of these measures, included expected implementation timescales.
Asset allocation
The Pension Schemes Bill underwent several rounds of ‘ping pong’ between the House of Lords and the House of Commons in recent weeks over the scope of the proposed mandation power.
The Act gives the government the power to mandate that master trusts and GPPs must allocate the assets in their default funds in a certain manner otherwise those schemes will no longer be qualifying schemes for the purposes of automatic enrolment. The asset classes and percentages are not set out in the Act and will be provided in regulations.
Following criticism from the House of Lords, which originally voted to remove the clause in its entirety, the House of Commons agreed to amend the clause, limiting its scope:
- regulations cannot require more than 10% (by value) of all scheme assets held in the default fund to be invested in “qualifying assets” or more than 5% (by value) to be invested in assets of a UK-specific description which match the targets set by the Mansion House Accord
- the power can only be used if the Secretary of State takes certain steps including preparing a report assessing whether they are any barriers to schemes investing in qualifying assets and the steps taken by the Secretary of State to address any such barriers
- TPR can suspend the applicability of the power to a scheme if it determines that, following an application by the trustees, that the trustees are reasonable to conclude that meeting the asset allocation requirement is not likely to be in the best interests of the members of the scheme, and
- the power cannot be used before 1 January 2028. The power can only be used once and will be repealed if it has not been used by the end of 2032 (this was previously 2035).
The government has previously stated that it does not intend to use its mandation powers unless the targets of the Manion House Accord are not satisfactorily implemented.
Key takeaways
The Pension Schemes Act 2026 is a key piece of legislation that will have significant impact for the pensions industry. Most of the measures will take some time to implement and the government has published a roadmap with details of expected timeframes, although it has confirmed that it plans to update this. Trustees and employers should keep a watching brief on changes that may impact their schemes and make any necessary preparations.