Chancellor Rachel Reeves has confirmed that the Pension Schemes Bill will become law within months, potentially adding £29,000 to average earners' retirement savings.
Speaking at Mansion House on Tuesday night, the Chancellor told financial services leaders that the legislation announced last year is progressing rapidly.
The reforms promise to transform pension savings through consolidating small pension pots worth £1,000 or less, implementing value for money requirements for all schemes, and establishing "megafunds" of at least £25 billion.
These larger funds aim to reduce costs and improve investment returns.
Working people on average salaries who save throughout their careers stand to benefit by up to £29,000 by retirement, according to Government calculations revealed as the Bill returned to Parliament for its second reading.
GB News | The Bill addresses a widespread problem
The Bill addresses a widespread problem where workers accumulate multiple small pensions as they change jobs, often losing track of them and paying excessive fees.
Under the new rules, these small pots will be consolidated into certified schemes that demonstrate good value.
All pension schemes will need to prove they deliver value for money, protecting savers from being trapped in underperforming funds.
The legislation also mandates the creation of multi-employer defined contribution "megafunds" with minimum assets of £25 billion.
These larger schemes will have greater capacity to invest in diverse assets whilst driving down costs through economies of scale. The reforms aim to support 20 million pension savers across the UK.
During her Mansion House speech, Reeves declared: "Last year at Mansion House, I set out an overhaul of our pensions system and the Pension Schemes Bill, led by my colleague the Pensions Minister, will be signed into law in the next few months."
She emphasised the Government's commitment to maximising pension potential, stating: "We have a duty to maximise the potential of people's pension savings.
"And our Bill reserves the power to mandate pension funds to invest productively in a wider range of assets sending a clear signal that pension funds and this government are united in our determination to deliver higher returns for savers and more investment for the economy."
GETTY | The Chancellor positioned financial services at the centre of the Government's growth strategy,
The Chancellor positioned financial services at the centre of the Government's growth strategy, asserting that Britain cannot achieve its ambitions without a "fighting fit and thriving" financial sector.
The Bill includes measures to increase flexibility for defined benefit pension schemes, potentially releasing £160 billion in collective surplus to support employers' investment plans and benefit scheme members.
All pension schemes will be required to offer default routes to retirement income, simplifying choices for savers.
GETTY | All pension schemes will be required to offer default routes to retirement income, simplifying choices for savers
The Local Government Pension Scheme will undergo consolidation of its £400 billion in assets into a smaller number of expert pools, with Minister Jim McMahon noting assets are projected to reach £1 trillion by 2040.
Zoe Alexander, Director of Policy and Advocacy for PLSA, welcomed the legislation: "Once fully implemented, these measures should reduce the cost of administering pensions, remove complexity for savers and help ensure schemes are maximising the value they provide members."