The Pension Schemes Act 2026 received royal assent on 29 April 2026 and primarily establishes a framework for regulations in various areas of pension schemes.
Defined Benefit (DB) Pensions
- Local Government Pension Scheme (LGPS): The Act provides the framework for regulations on asset pooling, including requiring asset pools to be Financial Conduct Authority (FCA) authorised and reducing the number of asset pools from eight to six. Regulations are expected to be published shortly, and pools will need to be established as UK alternative investment fund managers by 30 September 2027.
- Power to Pay Surplus to Employer: The Act introduces a statutory power allowing trustees to modify scheme rules to permit surplus extraction from DB schemes. The power is at the trustees' discretion, and regulations will be introduced in 2026/2027, with the tax rate on surplus extraction remaining at 25%.
Defined Contribution (DC) Pensions
- Value for Money (VFM): The Act sets out the framework for regulations to evaluate and promote best practice in DC schemes, including requirements for trustees to carry out VFM assessments and ratings. Regulations are expected in 2026/2027, with the first VFM assessments required in 2028.
- Consolidation of Small Dormant DC Pension Pots: The Act establishes a framework for the automatic consolidation of DC pension pots with a value of up to £1,000 where a member has not made any contributions or investment decisions for at least 12 months. Regulations are expected in 2027/28, with transfers expected to come into force in 2030.
- Scale and Asset Allocation (Mandation): The Act introduces a requirement for UK resident authorised master trusts and group personal pension schemes (GPPs) to have at least £25 billion of assets under management (AUM) in their main scale default arrangements by 2030. Regulations will be introduced in 2026/2027, with the Act providing a reserve power for the government to mandate asset allocation in DC main default funds by 2032.
- Default Arrangements and FCA Contractual Override: The Act sets out the framework for regulations to prevent providers from operating new non-scale default arrangements and requires the consolidation of existing non-scale default arrangements. A contractual override regime for FCA-regulated pension schemes in relation to underperforming and legacy arrangements will be developed by the FCA.
- Guided Retirement: The Act sets out new duties for trustees or managers to design and make available one or more default pension benefit solutions for eligible members of DC schemes. Regulations are expected in 2026-2027, with master trusts required to comply in 2027 and this extended to single employer trusts and GPPs in 2028.
Superfunds
- The Act sets out a framework for the authorisation and regulation of DB commercial consolidators (superfunds). TPR’s approval will be required before a transfer may be made to a superfund, with regulations expected in 2026 and in force in 2028.
Miscellaneous
- Virgin Media Remedy: The Act introduces a remedy for schemes in England, Wales, Scotland and Northern Ireland that had amendments to their rules made without written confirmation from the scheme actuary that the scheme would continue to meet the reference scheme test.
- PPF and FAS: The Act introduces indexation of PPF and FAS compensation in relation to pre-1997 accrual and introduces measures to address limitations on the PPF levy, facilitating a zero levy without preventing the PPF from raising a levy in the future.
- The Pensions Ombudsman (TPO): The Act amends existing legislation to allow trustees to offset overpaid benefits against future pension payments following a TPO determination, simplifying the process for trustees.
