The Pension Schemes Act 2026, as enacted on legislation.gov.uk and given Royal Assent on 29 April 2026, is one of the widest pensions statutes in recent years. It reaches across local government investment pooling, defined contribution market oversight, default arrangements, decumulation design, superfunds, compensation rules and a series of technical corrections to older pensions law. The Act does not switch every policy on at once. Much of it gives the Secretary of State, the Treasury, the Financial Conduct Authority and the Pensions Regulator new powers to fill in detail later through regulations and rules. The legal structure is now in place, but many operational duties will arrive through secondary legislation, regulator guidance and commencement orders.
The most immediate structural change in Part 1 is a new statutory basis for asset pooling in pension schemes for local government workers. Scheme regulations may now impose duties on scheme managers, require or prohibit participation in asset pool companies, and allow the responsible authority to direct a manager to join or leave a named pool. The same framework lets the authority direct an asset pool company, or the participating managers, to take steps needed to give effect to that decision. The Act also opens the door to direct oversight of the pool itself. Regulations may impose duties on asset pool companies, require or permit guidance from the responsible authority, and allow directions on compliance with that guidance or on the way specified investment management activities are carried out. Where participation or operational directions are contemplated, the Act requires prior consultation with the affected managers, the pool company and, in some cases, the Financial Conduct Authority.
That pooling model is tied to a firmer investment governance regime. Where regulations are made under the new LGPS asset-pooling powers, they must also deal with how scheme managers handle the funds and other assets for which they are responsible. At minimum, each manager must formulate, publish and keep under review an investment strategy, while most assets are to be held on behalf of the manager by its asset pool company and managed in line with that strategy. For England and Wales, the Act goes further by requiring each scheme manager other than the Environment Agency to co-operate with an appropriate strategic authority to identify and develop suitable investment opportunities. The legislation also anticipates rules on responsible investment, local investment and strategic asset allocation. Alongside that, it permits independent periodic and ad hoc governance reviews, requires publication of review reports, creates a specific procurement exemption for qualifying LGPS contracts with asset pool companies, allows regulations to confer service-sharing or local authority powers on specified managers, and confirms that separate local government pension funds may be merged, including on a compulsory basis.
Chapter 1 of Part 2 creates a new value for money regime for money purchase occupational pensions. The Secretary of State may require responsible trustees or managers to publish value for money assessments, share standardised metric data, compare their performance with comparator schemes or benchmarks and assign ratings. The Act sketches a three-level model of fully delivering, intermediate and not delivering, although regulations may subdivide the intermediate category. The rating is then linked to consequences. Intermediate ratings may trigger improvement plans, action plans, employer notices and limits on taking on new participating employers. A not delivering rating can lead to stronger intervention, including action plans, closure to new participating employers and, where the Pensions Regulator concludes that members would obtain better long-term value elsewhere, a regulator-directed transfer solution. The Act also gives ministers power to require member satisfaction survey data and gives the Regulator enforcement tools, including compliance notices, penalty notices and the ability to substitute a rating it considers correct.
Chapter 2 tackles one of the longest-running defined contribution problems: small dormant pension pots left behind after automatic enrolment. The Act allows regulations to require auto-enrolment schemes to move eligible dormant pots worth £1,000 or less into authorised consolidator schemes or consolidator arrangements. A pot is dormant if no contributions have been paid for a prescribed period of at least 12 months and, subject to exceptions, the individual has taken no step to confirm or change the investment approach. The structure is designed around member notification rather than active member initiation. A prescribed destination proposer must generate a default proposal and one or more alternatives. Trustees or managers must then send a transfer notice to the individual, setting out the proposals and the consequence of not responding. If there is no response after the notice period, the default transfer can proceed; if the member chooses an alternative, that choice governs; if the member says no action should be taken, the transfer does not happen. The Act also sets out how consolidator Master Trusts may be authorised by the Pensions Regulator, how FCA-regulated schemes may be listed, and how data-sharing, compensation and enforcement can be handled.
Another significant reform is the new approval regime for large default arrangements in automatic enrolment. Relevant Master Trusts and certain group personal pension schemes will, once commenced, need approval in respect of a main scale default arrangement. The headline threshold is £25 billion, measured across the main arrangement and, where regulations permit, connected schemes using the same investment strategy. The Act also creates transition pathway relief for schemes that can show a credible plan to get there and a separate new entrant pathway for schemes with no members but strong growth potential and an innovative design. Alongside scale, the Act creates a potential asset allocation requirement for default funds. Regulations may require a prescribed share of main default fund assets to be held in qualifying asset classes such as private equity, venture capital, private credit, land, infrastructure and other unlisted equity. Parliament has built in clear limits: no more than 10 per cent of main default fund assets can be required to sit in qualifying assets, and no more than 5 per cent can be required to fit a UK-specific description. That power cannot be exercised before 1 January 2028, and if the relevant commencement has not happened by the end of 2032 the asset allocation provisions fall away. The scale requirement itself cannot be commenced before 1 January 2030.
The Act also turns to the structure of default arrangements and decumulation. It allows future regulations to restrict the launch of non-scale default arrangements and, after a formal review, to require their consolidation into approved main scale default arrangements. At the same time, Chapter 6 of Part 2 requires trustees or managers of relevant occupational defined contribution schemes to design and offer one or more default pension benefit solutions, or to arrange access to a qualifying solution in another scheme where that would produce a better outcome or where in-house design is not reasonably practicable. Those solutions are intended to provide a regular income in retirement unless the member chooses another route. Communication duties are central to this part of the Act. Trustees or managers will need to describe the solution available, explain who it may suit, give plain-language information throughout accumulation and decumulation, and publish a pension benefits strategy. In the occupational regime, transfers under transfer arrangements still require member consent. For FCA-regulated schemes, however, the Act also creates a separate mechanism for unilateral changes to pension pots. Providers may amend terms, switch investments or transfer certain pots internally or to another provider, but only if a statutory best-interests test is met, an independent reviewer certifies the proposal and members receive notice under FCA rules.
Part 3 puts commercial defined-benefit superfunds on an express statutory footing for the first time. The Act defines a superfund scheme as a trust-based occupational scheme that has received defined-benefit liabilities from another scheme, is supported by a capital buffer and is not supported by a substantive employer covenant. From here, the market becomes a licensed one: unauthorised promotion of a scheme as able to receive superfund transfers is a criminal offence, and no superfund transfer may be made or received without approval. The authorisation and transfer tests are detailed. The Pensions Regulator may authorise a superfund only if its organisation, staff, plans, policies and procedures indicate that it is likely to comply with the ongoing rules. Each individual transfer then needs separate approval. Among other conditions, the ceding scheme must have no active members, the trustees must not be in a position to secure insurer buyout, and the transfer must make full satisfaction of liabilities more likely. Once operating, a superfund faces ongoing duties on governance, management documents, financial monitoring, capital buffer investment, key function holders, trustee approval, reporting and notifications. If an event of concern occurs, the Act requires a response plan and gives the Regulator power to direct action, pause payments or transfers, impose penalties and ultimately withdraw authorisation.
Beyond the headline structural reforms, the Act makes several changes that trustees and advisers will need to track closely. It replaces the old resolution procedure on payments of surplus to an employer with a new route in the Pensions Act 1995, while repealing section 251 of the Pensions Act 2004. Future regulations must set the guardrails, including actuarial certification of funding conditions and member notification before a surplus payment is made. The Act also clarifies that a frozen scheme cannot use the power, and allows additional restrictions for superfunds. It also creates a remediation route for older contracted-out scheme amendments where the actuarial confirmation required under historic regulation 42 was not properly obtained. In broad terms, an alteration can be treated as valid if a scheme actuary confirms that, on the assumption it was validly made, the change would not have caused the scheme to fail the statutory standard. Separate but parallel provisions apply in Great Britain and Northern Ireland, with carve-outs for cases already determined or already in live dispute by 5 June 2025.
Compensation and public-sector housekeeping are another theme. The Act updates Pension Protection Fund and Financial Assistance Scheme indexation rules so that some pre-1997 increases and GMP-related service can be reflected more accurately, expands pensions guidance to cover the Pension Protection Fund and the Financial Assistance Scheme, and extends the terminal illness test in the relevant compensation and assistance regimes from six months to 12 months. It also removes the old PPF initial levy, recasts the Board's levy-setting powers and stops any administration levy being payable for the financial years beginning on 1 April 2023 and 1 April 2024. Some provisions are highly specific. The Secretary of State is given bespoke powers to establish a new public scheme for members of the AWE Pension Scheme, transfer qualifying accrued rights and move assets or liabilities, subject to statutory protections that transferred benefits must in all material respects be at least as good, and that money purchase rights retain equivalent value. Elsewhere, employers may be required to share member data with schemes, and the Government Actuary must publish 50-year cash-flow projections for specified defined benefit public service pension schemes outside local government. The practical reading is that the Pension Schemes Act 2026 is less a single reform than a pensions programme in statute form: the primary legislation is now in place, but the compliance timetable will be written through secondary legislation over the next several years.