The Pension Schemes Bill 2024-25 - What It Really Means and Where Things Stand Now

5th December 2025

The Pension Schemes Bill 2024-25 is one of the most ambitious attempts in recent years to reshape the UK's pension landscape.

Announced in June 2025 and still making its way through Parliament, the Bill aims to overhaul how workplace pensions operate, how pension assets are invested, and how members access retirement income.

It represents a shift toward scale, efficiency, and stronger outcomes for savers, alongside an effort to unlock pension capital for broader economic growth.

Yet, despite the political attention, significant media headlines and strong industry interest, the Bill is not yet law. Several provisions remain under debate, and the most consequential reforms will require further regulations even after Royal Assent.

For pension professionals, employers and savers, it can be difficult to separate what has actually happened from what is planned. This essay brings the full picture together - the reforms, the rationale, the parliamentary journey, and what to expect in the coming years.

Aims and Vision: Why the Bill Matters

At its core, the Pension Schemes Bill seeks to solve three major structural problems in the UK pension system:

1. Too many small, stranded pension pots

Auto-enrolment has been a success, but it has also created a trail of small dormant pots as people change jobs—often worth only a few hundred pounds. Managing millions of tiny pots is inefficient for schemes and often poor value for savers.

The Bill introduces mechanisms to consolidate these into large, authorised "pot-follower" schemes, reducing administrative drag and improving investment efficiency.

2. Lack of scale in defined contribution (DC) pensions

Most UK DC schemes are comparatively small. Smaller funds struggle to access certain asset classes and often deliver weaker risk-adjusted performance compared with large global funds.

The Bill encourages the creation of large "megafunds" or consolidated master trusts—schemes with tens of billions of pounds in assets—capable of delivering better governance, lower fees and more sophisticated investment strategies.

3. Surpluses locked inside defined benefit (DB) schemes

Around £160 billion of surplus funding sits in DB schemes that are closed to new members. Historically, rules governing access to that surplus have been strict and uncertain.

The Bill introduces a clearer legal framework allowing well-funded DB schemes to release part of their surplus, either to employers (supporting growth and investment) or back into the scheme for members. While controversial, the proposal is intended to ensure that strong funding positions translate into real-world flexibility.

Key Reforms in the Bill

While the Bill contains many technical provisions, its major reforms fall into several broad categories:

1. Automatic consolidation of small pension pots

The government plans to designate authorised consolidators—likely a small number of large schemes—to receive dormant pots that meet certain criteria. This is designed to streamline the system, reduce duplication and improve long-term returns.

2. Value-for-Money (VfM) rules for DC schemes

Schemes will have to demonstrate the value they provide. Poor-performing schemes could be required to wind up, merge or transfer members elsewhere. The aim is to eliminate "zombie" pension funds that consistently underperform.

3. Growth-focused investment strategy

Through larger funds and clearer regulatory direction, the Bill encourages investment into productive assets: infrastructure, clean energy projects, housing, and high-growth businesses. This aligns with the government's broader economic strategy to unlock pension capital for national development.

4. Statutory framework for pension superfunds

Superfunds offer an alternative to buy-out for DB schemes that cannot afford an insurance solution. The Bill formalises the legal and regulatory regime for these vehicles, giving employers and trustees more clarity and confidence.

5. Retirement income defaults ("guided retirement")

For the first time, schemes will be required to offer standardised, high-quality default pathways for members beginning post-retirement drawdown. This aims to simplify the complex choices people face when converting a pension pot into lifelong income.

Where the Bill Stands: The Parliamentary Process So Far

Despite the coverage it has received, the Pension Schemes Bill has not yet completed its passage through Parliament.

Here is the accurate timeline as of December 2025:

5 June 2025: Bill introduced in the House of Commons.

7 July 2025: Second Reading — MPs agree to the Bill's principles.

2-11 September 2025: Public Bill Committee considers detailed amendments; 232 government amendments accepted.

3 December 2025: Report Stage begins in the Commons.

Next steps: Third Reading → House of Lords → consideration of any amendments → Royal Assent.

Currently, the Bill remains at the Commons Report Stage, meaning it is still subject to modification and has not yet entered the House of Lords.

Will It Become Law Soon?

The short answer is: not immediately.

Most legal and pensions advisers expect the Bill to receive Royal Assent around mid-2026, assuming no major political delays. However, several of the reforms—including surplus extraction, consolidator authorisation, and retirement guidance pathways—depend on detailed secondary legislation. In practice, this means:

Some reforms may not begin until 2027,

Others (especially operational aspects) may take longer to fully implement,

And some may change substantially during the regulatory design phase.

For UK pension schemes, the Bill’s progress therefore signals direction, not immediate obligation.

What Still Needs Clarifying?

While the Bill sets a broad framework, many important details remain undecided, such as:

How consolidators for small pots will be chosen

What tests trustees must perform before extracting surplus

How “best interests” assessments for pot transfers will work

The thresholds for megafund authorisation

The regulatory structure for superfunds

The precise requirements for guided retirement defaults

How the Value-for-Money rules will be measured and enforced

The success of the reforms depends heavily on these decisions.

What It Means for Savers

If implemented as intended, the reforms could benefit pension savers by:

reducing fees through scale,

improving investment performance over decades,

simplifying retirement choices,

reducing the number of abandoned small pots,

and potentially unlocking new benefits in well-funded DB schemes.

However, because none of these changes are in force yet, savers should not expect immediate changes to their pension statements. The impact will be long-term and gradual.

What It Means for Employers and Schemes

Employers with DB schemes may eventually gain the ability to access part of their scheme surplus—something with major financial implications. Trustees, meanwhile, will face new duties around surplus management, funding standards, and member communication.

DC schemes need to prepare for stricter value assessments and possible consolidation. Providers that cannot meet the new standards may be required to merge or transfer members to larger schemes.

For both types of schemes, the message is clear: change is coming, but the detail is still evolving.

Conclusion: A Significant but Incomplete Reform

The Pension Schemes Bill is ambitious. It seeks to modernise UK pensions, boost investment capability, address decades-old structural issues, and align the system with the needs of both savers and the wider economy. If executed well, the Bill could reshape the pension landscape for a generation.

But the process is far from complete. The Bill remains in the middle of its parliamentary journey, and many of the most consequential reforms await detailed regulations. Politically, economically and operationally, there is much still to decide.

For now, pensions professionals and employers should stay informed, watch the Bill’s progress through Parliament, and prepare for substantial regulatory evolution from 2026 onwards. For savers, the message is one of cautious optimism: meaningful improvements are on the horizon, but not yet at the implementation stage.