New Pension Law Could Mean £29,000 Boost for UK Workers—Are You Included

A sweeping pension reform is underway in the UK that promises to boost retirement savings by up to £29,000 for millions of workers. Announced in July 2025, the Pension Schemes Bill introduces a series of transformative measures designed to modernize the pension system, cut fees, and increase long-term returns.

With strong backing from consumer advocates, pension experts, and cross-party MPs, the bill is being called one of the most significant updates to the UK’s retirement landscape in decades.

What Is the Pension Schemes Bill 2025?

The Pension Schemes Bill 2025 aims to address long-standing inefficiencies in how pensions are managed and accessed. It is expected to benefit over 20 million savers by:

• Consolidating small pension pots
• Reducing hidden charges and poor-performing schemes
• Expanding access to higher-return investment funds
• Making income drawdown at retirement simpler and cheaper

These reforms will affect most workplace pensions and introduce major structural changes to how pension savings are built and used.

Key Reforms Under the Bill

Let’s take a closer look at the most impactful elements of the bill and how they benefit savers:

1. Automatic Consolidation of Small Pots

Workers who’ve changed jobs frequently often accumulate multiple small pensions, each under £1,000. These pots are:

• Hard to manage
• Often hit by high fees
• Frequently lost or forgotten

Under the new rules:

• Small pots will be automatically merged into larger, better-performing schemes
• Savers will avoid duplicative charges and management fees

This change alone is expected to significantly increase pension balances over time.

2. Stricter Value-for-Money Standards

Every pension scheme will be required to demonstrate good value for savers. Those that underperform or charge excessive fees must:

• Improve performance
• Lower costs
• Merge with better-run funds

This ensures workers are not left stuck in poorly managed schemes that erode their savings.

3. Launch of Large “DC Megafunds”

The bill establishes Defined Contribution (DC) megafunds, each managing at least £25 billion in assets. These funds will:

• Offer lower fees through economies of scale
• Enable access to long-term investment strategies
• Provide higher net returns to members

Megafunds are expected to become the new standard for workplace pensions in the UK.

4. Default Retirement Income Products

Deciding how to draw down pension savings can be confusing and costly. The bill will require pension providers to:

• Offer default income drawdown products
• Provide simple, low-cost retirement income options

This ensures retirees don’t have to pay for expensive advice or risk poor financial decisions at a vulnerable stage of life.

5. Surplus Release from Defined Benefit (DB) Schemes

An estimated £160 billion in surplus funds sits unused in DB schemes. The bill allows employers and trustees to safely release some of these funds to:

• Enhance member benefits
• Support corporate pensions
• Improve scheme funding flexibility

6. Reform of the Local Government Pension Scheme (LGPS)

The LGPS, managing £400 billion in assets, will be consolidated into larger investment pools. These funds will:

• Focus on long-term infrastructure and UK growth projects
• Deliver stronger returns
• Help communities through place-based investment

Assets are projected to reach £1 trillion by 2040, boosting both savers and the broader economy.

How Much More Could Workers Save?

According to government projections, the average worker could retire with up to £29,000 more in their pension pot as a result of:

• Lower charges
• Improved investment returns
• Efficient management of consolidated pensions

When Will the Changes Happen?

The bill is currently moving through Parliament and is expected to become law by the end of 2025. Implementation will be phased in starting in 2026, with major structural changes taking effect over the next 3–5 years.

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