Working people on an average salary who save into a pension pot over their career, could benefit by up to £29,000 by the time they retire thanks to major Government reforms that will consolidate small pension pots, ensure schemes are value for money, and create larger pension schemes.

The figure was revealed as the Pension Schemes Bill returns to Parliament for its second reading today [7 July 2025].

Reforms in the Bill, which have received wide-spread support from the pensions industry and consumer groups, will support 20 million pension savers to get more from their pension pots and be better prepared for retirement.

The Bill will bring together small pension pots worth £1,000 or less into one pension scheme that is certified as delivering good value to savers, making pension saving less hassle and more rewarding. At present many people struggle to keep track of multiple small pensions as they move jobs and can pay high fees as a result.

In future pension schemes will also need to prove they are value for money, helping savers understand whether their scheme is giving them good returns and protecting them from getting stuck in underperforming schemes for years on end.

These measures will lay the foundation for the upcoming Pensions Review to examine how we get to a fair and sustainable pensions system, supporting growth and delivering on the government’s Plan for Change by putting more money into people’s pockets.

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.

Other measures include:

• New rules creating multi-employer DC scheme “megafunds” of at least £25 billion, so that bigger and better pension schemes can drive down costs and invest in a wider range of assets.
• Simplifying retirement choices, with all pension schemes offering default routes to an income in retirement.
• Increased flexibility for Defined Benefit (DB) pension schemes to safely release surplus worth collectively £160 billion, to support employers’ investment plans and to benefit scheme members.

The reforms will also unlock long-term investment in the UK economy by removing barriers to growth, strengthening the security and governance of pension schemes and ultimately delivering better returns for people saving for their retirement.

The pace of pension reform has ramped up with measures in the Bill set to revolutionise the pensions landscape in the coming years. While the benefits of the Bill are clear, significant challenges still remains with these benefits varied for different workers and different groups. This is why the upcoming Pensions Review will examine challenges such as pension adequacy to ensure underserved groups do not miss out on the benefits arising from these measures.

Reforms announced as part of the Bill will also future proof the Local Government Pension Scheme (LGPS) by leading to the consolidation of all £400 billion of assets into a small number of expert asset pools which can invest in local areas infrastructure, housing and clean energy.

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.

Additional Information

• To build scale in the pensions industry and stimulate UK investment, the Pension Schemes Bill will:

• Require multi-employer Defined Contribution schemes used for automatic enrolment, unless exempt, to have at least £25 billion of assets in their main default arrangement by 2030 or be on route to achieving that scale by 2035 through having £10 billion in their main default.
• Allow more flexibility for trustees of well-funded Defined Benefit pension schemes to share surplus funds with employers and their scheme members, with strict funding safeguards, unlocking some of the £160 billion surplus funds to be reinvested across the UK economy, boosting business productivity and delivering for members.
• Create a legislative framework for the regulation of superfunds to encourage growth of the superfund market and underpin the security of members’ benefits.
• Relax restrictions to allow the Board of the Pension Protection Fund (PPF) to reduce the annual pension protection levy it collects from pension schemes, when it is not required and collect less from businesses up and down the country.
• Extend the definition of ‘terminal illness’ in the Pension Protection Fund and Financial Assistance Scheme legislation, so that eligible members who are diagnosed as terminally ill can receive payments at an earlier stage of their illness.

• Lead to all Local Government Pension Scheme in England and Wales (LGPS) investments being managed by FCA-regulated asset pools, who will be responsible for implementing investment strategies set by their partner LGPS Administering Authorities.

• To ensure better outcomes for savers, the Pension Schemes Bill will:

• Introduce powers to create a Value for Money framework to enable a shift in focus from cost towards value and protect savers from becoming stuck in underperforming arrangements for extended periods.

• Implement Guided Retirement Options which will place duties on trustees to provide default solutions for their members, unless the member chooses to opt-out. The default will provide an income in later life, including consideration for longevity protection – which could include CDC provision.
• Enable authorisation of providers to act as a consolidator scheme. This will also aid the building of scale with pots worth £1,000 or less consolidated into a small number of large, good value schemes.

• Facilitate PPF and FAS information to be displayed on dashboards.

• The Competent Court measure in the Bill will confirm the legal standing of The Pensions Ombudsman (TPO) to make enforceable determinations in pensions overpayment recoupment cases without requiring a county court judge’s order, leading to quicker customer journeys and shorter waiting times.
• The £29,000 boost to retirement pots is estimated through assuming greater investment performance through addressing underperformance and increasing diversification, reducing costs which could be passed onto savers and by investing for longer, ensuring worker’s pension pots work harder, for longer.
• These figures are based on published annual earnings averages, which shows a full-time male will earn just over £37,000 a year and a woman just under £32,000.
• Measures in the Bill mean that an average male earner at the start of their career could see up to £31,000 more in their retirement fund by the time they retire while a women could see £26,000 more in their retirement fund. See the Pension Schemes Bill Impact Assessment for further details on the calculations.
• More information on the Government’s Pension Investment Review can be found here: Pensions Investment Review: Final Report – GOV.UK