Top News

A new piece of legislation, which comes into effect this month, will bring changes to pensions. The changes could mean up to £29,000 is added to the average pension pot, benefiting more than 20 million workers, the Government says.

The Pension Schemes Act 2026 will make it easier to understand retirement funds, make more services available to customers and change how the industry works.

• HMRC confirms £17 extra tax charges for state pensioners every month

• Abandoned UK shopping village left to rot after all 40 stores close down

There are five main changes. Here is how they will affect you:

Megafunds could be beneficial, but there are risks

Smaller pension schemes from previous roles could be added to larger funds made up of assets from local government pension scheme authorities. The Government has said this will allow a wider range of assets and keep costs down.

If lower fees were created, Currie said the scale could deliver real benefits, but warned that it might not always be the case.

"The test is whether those efficiencies are passed back to savers and whether smaller, innovative providers can still compete to keep standards high," she said.

If you change jobs, making small pot consolidations could help

It can be easy to forget about pension pots, so the new law could mean these deferred pension pots that end up worth £1,000 or less will be automatically moved and merged into a single, larger pot, Sky News reports. This will be handled by a certified consolidator, and the pot's owner will be contacted about the move and will be able to choose what they'd like to do. However, the new duty isn't set to come into effect until 2030.

Maike Currie, vice president of personal finance at PensionBee, shared her thoughts on the new legislation and revealed that about 4.8 million pots were being forgotten about in the UK.

She said: "Automatically consolidating pots under £1,000 should reunite workers with forgotten savings and cut the charges that quietly erode small balances."

New legal duty for retirement advice

Legally, trustees will be held responsible for ensuring each defined contribution pension scheme is managed in the best interest of its members.

Currie added: "Many workers reach 55 with no plan and risk either drawing down their pension pot too quickly or being overly cautious."

Changes could be made to overpayment disputes

From June 29, the pensions ombudsman will have new powers in cases involving pension overpayments, meaning people will not have to wait for as long to start recovering money and making the process more straightforward.

It could be an easier way to judge your pension scheme

A standardised "value for money" framework will be used to assess how well each scheme is performing under the new legislation and could mean less guesswork and more confidence in the retirement fund.

Currie said: "Forcing schemes to publish comparable data on what they actually deliver will enable workers to assess, for the first time, whether their pension is genuinely working for them."