The U.K. Parliament approved a wide-ranging reform of the country’s pension system, paving the way for the consolidation of local government pension schemes and introducing multiple changes for corporate and government defined benefit and defined contribution plans.
The Pension Schemes Bill aims to consolidate several Local Government Pension Schemes into a handful of “megafunds,” each with £25 billion ($33.7 billion) in assets, to better take advantage of scale for investments.
The U.K. workplace defined contribution market is estimated to be worth £600 billion to £800 billion in assets, according to data from the Pensions Regulator. Private DB schemes are estimated at between £1.1 trillion and £1.4 trillion, according to the U.K. parliament.
Additionally, the bill includes numerous reforms to the country’s defined contribution system, including mandating default retirement income options for plan participants. The bill also provides a framework for defined benefit plans to take advantage of and capture their funding surpluses.
“The Pension Schemes Bill … marks a significant step forward for the U.K. pensions system,” said Ian Cornelius, CEO of Nest [National Employment Savings Trust] Pensions, in a statement. “It sends a strong signal that large, well-governed schemes are best placed to drive innovation and deliver for savers.”
Previous versions of the bill, in line with 2025’s Mansion House Accord, would have given the government a reserve power to mandate a baseline target for pension funds to invest in domestic assets and alternative investments—meaning a target allocation to these assets could be set by the government if a minimum target was not achieved by a fund.
The mandates in previous versions of the bill were widely criticized, but the bill’s most recent text adds guardrails and limits the government’s ability to mandate asset allocation.
“The Bill will introduce some vital reforms with real potential to improve member outcomes, and a step forward on mandation, combined with the careful limiting of the scope of the powers—it is a big win,” said Ruari Grant, head of policy and external affairs at workplace pension provider TPT Retirement Solutions, in a statement.
Having been approved by both the House of Commons and the House of Lords, the bill will proceed to royal assent, where it will be formally approved into law by King Charles III.
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Tags: Pension Schemes Bill