**Workers to See Retirement Savings Rise by Thousands Under New Pension Reforms**
Millions of UK workers are poised for a significant uplift in their retirement funds, with government plans to overhaul the pensions landscape through new legislation aimed at consolidating smaller pots into larger, better-value schemes. The long-anticipated Pension Schemes Bill, which returned to Parliament for a second reading on 7 July, could mean an average gain of up to £29,000 for some savers over their working lives.
The core focus of the bill is to address the persistent issue of “stranded” pension pots – those with £1,000 or less left languishing in schemes after a person has switched jobs. With Britons now expected to move employers multiple times during their careers, the industry is awash with millions of small, often overlooked pension pots which can be eroded by fees and are tricky for individuals to keep track of.
Recent government figures suggest that up to 20 million savers could benefit from these reforms. By merging smaller pots into single, certified master trusts, the government hopes to improve efficiency, drive down administration costs, and ensure each saver enjoys greater value for their money over the full term of their career. These changes come alongside a push for better transparency and accountability from providers.
A spokesperson for the Department for Work and Pensions underlined the bill’s significance, saying: “We are speeding up pension reform to guarantee that people’s hard-earned savings work harder for them as they head towards retirement.” The intention is, not only, to deliver potentially thousands of pounds more in retirement for average earners but also to create a pensions system that is simpler to use and understand.
Beyond consolidating small pots, the legislation introduces other key features. There will be a requirement for all pension schemes to clearly demonstrate their value for money, offering greater insight into fund performance. This, it is argued, will prevent savers from being trapped in underperforming schemes—an issue that has dogged the sector for years and often leaves retirees with less than they expected.
Another notable provision in the bill is the creation of “mega-funds” – multi-employer defined contribution (DC) schemes, with assets of £25 billion or more. These larger schemes, which are expected to emerge from the new regime, would be able to negotiate better deals and invest across a broader range of assets compared to their smaller counterparts. The overall goal, according to policymakers, is to create a more robust and competitive pensions market delivering better long-term outcomes.
Defined Benefit (DB) pension schemes are also expected to receive greater flexibility under the new rules, enabling them to safely unlock a collective surplus estimated at £160 billion. This could, in turn, benefit both sponsoring employers and scheme members, supporting business investment and further strengthening the security of members’ benefits.
The government says these reforms set the groundwork for its wider “Pensions Review” – an ongoing investigation into creating a fairer, more resilient pension system in the UK whilst encouraging economic growth. Local government pension schemes are also in the frame for modernisation, with assets potentially hitting £1 trillion by 2040, according to Minister for Local Government and English Devolution, Jim McMahon OBE. He sees the reforms as key to both future-proofing the schemes and driving new investment into local communities.
Industry reaction to the bill has been broadly positive. Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, described its arrival as a “significant step forward,” noting that it would “reduce the cost of administering pensions, remove complexity for savers, and help ensure schemes are maximising the value they provide members.” Consumer groups, too, have welcomed the move, citing the long-running complexities that have faced those trying to trace and consolidate multiple pots from different jobs.
As the Pension Schemes Bill moves through committee scrutiny, it marks a potentially transformative moment for retirement saving in the UK. While it will be months before the full impact is felt, the reforms represent a concerted effort to strengthen the social safety net for millions of future retirees – and, ultimately, to ensure that more people retire with greater financial security.