On 29 April 2026, the Pension Schemes Act 2026 (the Act) received Royal Assent. The Act contains multiple reforms to DC pensions.

Published: 1 May 2026
Author: Heather Chandler & Rhiannon Barnsley-Bloomfield

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 “tackle schemes delivering poor returns for savers, combine smaller pension pots, and create bigger and better pension funds” with multiple measures introduced to reform the DC pensions market.

Scale requirements

Following the Government’s response to its consultation on Unlocking the UK pensions market for growth, there are new requirements for DC multi-employer schemes (ie master trusts and GPPs) 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.

If a scheme cannot meet the above requirement, there are two additional routes for schemes intended to “balance the need for a strong, consolidated market with the benefits of innovation, competition and orderly transition”:

• the transition pathway: giving existing smaller schemes that have at least £10 billion in assets under management in a MSDA by 2030 an additional five years to meet the scale requirement if they can show they have a credible plan to meet the requirement
• the new entrant pathway: giving new schemes the ability to enter the market if they are offering a genuinely innovative proposition that is “materially different” to existing market participants

Guidance on the new requirements has been published by the Department for Work & Pensions (DWP) and The Pensions Regulator (TPR). The transition pathway is expected to open in 2029 before the requirements apply (which is expected to be from 1 January 2030 at the earliest).

Contractual override

The Act introduces a 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 a scheme to a different scheme operated by the same provider or a scheme operated by a different provider without consent from members. Unilateral changes are subject to the “best interests test” and a certification from an independent person that the test is met.

Contractual override is expected to be available from 2028.

Value for Money assessments

The Act provides the legislative powers to mandate the Value for Money (VFM) framework for trust-based schemes with DC benefits which intends to shift the focus from cost to value. Trustees must carry out an assessment and assign a VFM rating.

If the trustees assign a ‘not delivering’ rating, they must prepare an action plan for TPR and inform the participating employers of the rating and the actions that the trustees consider appropriate having regard to the rating.

On 8 January 2026, the FCA, DWP and TPR jointly published a consultation on the proposed new framework. TPR and the FCA are targeting 2028 for the first VFM assessments to be provided under the framework with data collection for the new framework expected to begin in 2027.

Automatic small pot consolidation

Automatic enrolment schemes will be required to transfer small pension pots to authorised consolidators if they:

• are £1,000 or less in value (but not nil)
• have had no contributions paid into them or any active investment decisions made in respect of them in the last 12 months

There are certain exemptions, such as if the trustees of the scheme consider it is in the best interests of the member not to transfer the pot, for example, if the pot is held in a scheme that provides for a particular religious belief or the pot holds a legacy benefit such as a protected pension age. Members will also be able to opt-out of consolidation.

Eligible master trusts will be able to apply to TPR to become authorised consolidators.

The Government intends to introduce regulations for small pot consolidation in 2027/28 and the process of selecting consolidators is expected to take place in late 2028 / early 2029. The duty to consolidate is expected to come into force from 2030.

Default pension benefit solutions

Trustees of DC schemes will be required 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 (ie a default pension benefit solution). The solution must be appropriate for the generality of scheme members and should provide an income for the whole of retirement. The solution will be the designated solution under which members will receive their pension benefits unless they choose an alternative.

DWP regulations and FCA rules are expected in 2026. Master trusts are expected to start complying in 2027 with other schemes complying from 2028.

Key takeaways

There are a number of different measures being introduced with various implementation timelines. Trustees of DC schemes should check they are making the necessary preparations to ensure they can comply. TPR has recently published a blog post detailing the new requirements and suggesting that “smaller schemes must take a clear-eyed look at whether they can continue to meet rising expectations – or whether members would be better served through consolidation or wind up.”