Millions of UK workers could see their retirement savings grow by up to £29,000 thanks to a major overhaul of the pensions system under the Government’s new Pension Schemes Bill, which is
back in Parliament for its second reading today (7 July 2025).
As part of the government’s Plan for Change, the Bill aims to simplify pension management, improve value for savers, and strengthen the UK’s pension landscape for the future.
Key reforms and benefits
Consolidating Small Pension Pots: Millions of small pots under £1,000 will be merged into schemes certified for good value, helping workers avoid high fees and keep track of their savings as they change jobs.
Better Value for Savers: Pension schemes will be required to demonstrate they offer value for money, protecting savers from being locked into poorly performing plans.
Larger, More Efficient Pension Funds: New rules will create large-scale “megafunds” of at least £25 billion, allowing for lower costs and access to more diverse investments.
Simpler Retirement Options: All pension schemes will be required to offer straightforward, default income routes for retirees.
Defined Benefit Scheme Flexibility: DB schemes could release up to £160 billion in surplus funds, potentially boosting employer investments and delivering gains to members.
Minister for Pensions Torsten Bell said:
“We’re ramping up the pace of pension reform, to ensure that people’s pension savings works as hard for them as they worked to save.
The measures in our Pension Schemes Bill will drive costs down and returns up on workers’ retirement savings – putting more money in people’s pockets to the tune of up to £29,000 for an average earner and delivering on our Plan for Change”.
Future-proofing the system
The Bill also prepares the ground for a full Pensions Review to address broader challenges — including how to ensure underserved groups don’t miss out — and to build a fairer, more sustainable system.
In addition, the Local Government Pension Scheme (LGPS), which holds £400 billion in assets, will be consolidated into a smaller number of expert-led pools, enabling major investment in local infrastructure, housing, and clean energy.
Looking ahead
With widespread backing from the pensions industry and consumer advocates, these changes are expected to benefit over 20 million savers, unlock long-term investment in the UK economy, and help secure a stronger financial future for working people.
Minister for Local Government and English Devolution Jim McMahon OBE said:
“This Bill will ensure the Local Government Pension Scheme is fit for the future and harness its full potential, with assets due to reach £1 trillion by 2040, and will strengthen investment in local communities to accelerate growth as part of our Plan for Change”.
Zoe Alexander, Director of Policy and Advocacy for PLSA:
“The introduction of the Pension Schemes Bill is a significant milestone, bringing forward necessary legislation to enact important reforms that have the full backing of the pensions industry. This includes small pots consolidation, the Value for Money regime, decumulation options and changes to give DB funds more options for securing member benefits over the long-term.
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”. Photo by Andreas Lehner, Wikimedia commons.