The Pension Schemes Act has officially become law today, the Department for Work and Pensions (DWP) has announced. The legislation is described as a 'major reform' that will give every worker an average of £29,000 each by the time they retire.
The new law requires pension schemes to prove they are delivering value for money, enables the automatic consolidation of small pension pots, and aims to create larger funds which perform better. The DWP said many people build up several small pots as they move between jobs, making it difficult to track retirement savings. Automatic consolidation will give savers a clearer picture of their pension.
The Act also introduces a Value for Money framework to protect savers from being stuck in underperforming schemes. Pension scheme managers and trustees will need to offer clear default options for turning savings into retirement income, with the aim of providing a sustainable income in retirement.
Minister for Pensions Torsten Bell called the day a 'landmark moment' for the 22 million workers building up a pension pot in the UK. He criticised the fragmented system and said the Act will drive down costs, deliver higher returns, and give savers the security they deserve.
Claire Trott, head of advice at St. James's Place, welcomed the constrained 'mandation' power but raised concerns about the new requirement for a default retirement solution. She warned it could blur the boundary between guidance and advice, though noted her firm will continue constructive engagement with the government.
