A groundbreaking piece of legislation—the Pension Schemes Bill 2025—could help boost the retirement savings of millions of workers across the UK, with estimates suggesting average earners could see up to £32,000 more in their pensions by the time they retire.

According to the Department for Work and Pensions (DWP), these sweeping reforms are designed to make pension savings simpler, more secure, and ultimately more rewarding for the 20 million people currently saving for retirement.

What’s Changing Under the Pension Schemes Bill?

This landmark legislation aims to shake up the pensions industry with reforms that tackle common frustrations: small forgotten pension pots, poor returns, and complex decisions at retirement.

Key Features of the Bill:

✅ Automatic Consolidation of Small Pension Pots

Small pension pots under £1,000, typically accumulated from job-hopping, will now be automatically merged into larger schemes that offer better value. This consolidation is expected to reduce unnecessary fees and make it easier to keep track of your savings.

✅ Value-for-Money Test for Pension Schemes

Pension schemes will face stricter scrutiny to prove they deliver good value. This ensures savers won’t remain stuck in underperforming or expensive schemes for years without realizing it.

✅ Creation of ‘Mega’ Pension Funds

The Bill allows the formation of multi-employer “mega-funds” with assets of £25 billion or more. These larger schemes can drive down management fees and invest in more diversified opportunities, potentially delivering better long-term returns for members.

✅ Simplified Retirement Options

Savers often struggle to know how best to use their pension savings at retirement. The reforms will require schemes to offer clear, simple default income options, making it easier to secure a steady income later in life.

✅ Flexibility for Defined Benefit (DB) Schemes

New rules will allow DB schemes to safely access **surplus funds—estimated at £160 billion collectively—**to benefit members and free up capital for employers to reinvest in their businesses.

Why Does This Matter for You?

If you’re a worker earning an average salary and saving steadily into a pension throughout your career, these reforms could help add up to £32,000 to your total retirement savings. This is part of the government’s wider “Plan for Change” initiative to increase financial security and economic growth.

But it’s not just about individual gains:

• These reforms are designed to unlock long-term investment in the UK economy, including infrastructure, housing, and green energy.

• They will also future-proof the Local Government Pension Scheme (LGPS), helping consolidate its £400 billion of assets and ensure it delivers for future generations.

What Experts Are Saying

Pensions Minister Torsten Bell commented:

“These reforms ensure pensions work as hard as the people saving into them—delivering better returns and giving savers more confidence in their future.”

Jim McMahon OBE, Minister for Local Government and English Devolution:

“We’re making the Local Government Pension Scheme fit for the future while also driving investment into local communities.”

Zoe Alexander, PLSA Policy Director:

“These reforms tackle long-standing industry challenges like small pot consolidation and value-for-money standards. They will make pensions simpler, cheaper, and more effective for savers.”

What’s Next?

The Bill returned to Parliament for its second reading on 7 July 2025 and enjoys strong backing from both industry experts and consumer groups. Once passed, the reforms will phase in over the next few years, revolutionizing how we save for retirement.

FAQs: How Do These Pension Reforms Affect Me?

1️⃣ How will this help younger workers?

Younger savers often accumulate multiple small pots from frequent job changes. These will now be consolidated automatically, making pensions easier to manage and more valuable over time.

2️⃣ Does this affect the self-employed?

While these reforms mainly focus on traditional workplace pensions, future reviews may explore ways to better include self-employed workers, who currently face barriers to pension saving.

3️⃣ Will this reduce my pension fees?

Yes, consolidation and the formation of large pension “mega-funds” aim to reduce management fees, meaning more of your money stays invested for your future.

4️⃣ How does this benefit retirees already drawing pensions?

Those already retired are less affected directly, but schemes’ improved governance and new surplus rules for DB pensions could result in better funding security and potentially increased benefits in future.

5️⃣ Can I still choose my own pension investments?

Yes, these reforms don’t limit personal choice. But they will ensure any default options offer fair value and clear guidance, reducing the risk of poor decisions.

6️⃣ What’s the Local Government Pension Scheme (LGPS) change about?

The LGPS will consolidate assets into fewer, expert-managed pools, boosting investment potential in local infrastructure and driving better returns for members.

7️⃣ When will I see these changes?

Some measures—like small pots consolidation—will phase in soon after the Bill becomes law. Others, like value-for-money reporting, may take several years to be fully in place.

Final Thought: Pension Savings Are Changing for the Better

This Bill isn’t just about numbers—it’s about giving workers confidence that their hard-earned savings will grow and deliver a more secure retirement. Whether you’re just starting out, mid-career, or approaching retirement, these reforms aim to simplify your options, reduce costs, and deliver stronger financial outcomes.