Sweeping changes to UK pensions are reshaping how your employees build their retirement futures, and now’s the time for you to prepare.
The Pension Schemes Bill, introduced in June 2025 and set to become law in 2026, delivers the biggest pensions reforms in a generation. tightening funding, governance and sustainability rules, and strengthening protections for employees’ savings.
For HR and benefits leaders, the impact goes far beyond compliance. This is a critical opportunity to align pensions with your people strategy, communicate clearly with employees, and adapt your benefits offering to support evolving needs.
Here’s what you need to know — and what to do next.
Key reforms at a glance
Defined Benefit (DB) schemes: More accountability, more opportunity
- Stronger funding rules require trustees and employers to set long-term plans with stricter targets and closer scrutiny of business decisions.
- Surplus sharing is now permitted, giving well-funded schemes the option to return surplus assets to members and employers (with safeguards).
- Superfunds offer a route for smaller DB schemes to transfer to consolidated, regulated arrangements.
Defined Contribution (DC) schemes: Bigger, better governed, and more consolidated
- Megafunds for default options: By 2030, default DC funds must hold at least £25 billion in assets to remain eligible for auto-enrolment.
- Value-for-money (VFM) assessments will determine if schemes are delivering on performance, cost, and service. Failing schemes may be forced to wind up.
- Automatic small pot consolidation kicks in for dormant DC pots under £1,000.
- Default retirement options or decumulation strategies will be mandatory for trustees to support members who don’t actively choose how to access their pension.
Enhanced governance and ESG transparency
- Large schemes must produce climate and ESG disclosures, with policy nudges towards UK-focused investments.
- Trustees will be subject to tougher governance and reporting standards to ensure better protection for members.
What HR and benefits professionals should focus on now
- Understand what’s coming
Engage your pensions provider and legal advisors to clarify how the new rules will apply to your specific arrangements, and how your scheme intends to comply.
- Partner more closely with trustees
The emphasis on governance means HR must be looped into key business decisions early, including anything that could materially affect the scheme (like restructures or M&A activity).
- Reassess DB funding strategy
If your DB scheme is in surplus, now may be the time to explore options with finance and trustees. The new surplus-sharing provisions open the door to reinvestment or redistribution.
- Strengthen employee communications
Even well-intentioned reforms can cause concern. Equip your teams to explain the changes simply and positively, emphasising the protections being added for members.
- Evaluate your total reward approach
The rising cost and complexity of DB schemes may prompt a shift toward more flexible, digital DC arrangements. Make sure that your pensions offering supports your broader talent and wellbeing goals.
- Connect pensions to your ESG strategy
Employees increasingly expect employers to take a stand on sustainability, and pension investments can be a powerful part of that story. Show how your scheme’s ESG credentials align with your values.
The opportunity: Build trust while modernising benefits
This is more than a policy update; it’s a chance to strengthen your employee value proposition. By engaging early and using these reforms as a catalyst for clarity, transparency and flexibility, HR leaders can build confidence and help employees feel more secure about their long-term financial futures.
How FlexGenius helps employers stay flexible and compliant
Adapting to pension reform doesn’t have to mean adding complexity. FlexGenius empowers employers to offer flexible salary sacrifice contributions that employees can adjust anytime, with instant tax relief at marginal rates.
Our platform’s pension modules include configurable matching and contribution capping tools, making it easier to stay within annual and lifetime allowances while giving your people more control over how they save.
With FlexGenius, you can embed pensions into a seamless, personalised benefits experience that adapts to your workforce, your compliance needs, and your budget.
Empower your employees with financial security. For more information or to see how FlexGenius can help you build a thriving culture, book a demo today.
For further information, please email enquiries@avantus.co.uk or call 0800 652 4745.
This article reflects the draft Pension Schemes Bill as introduced in June 2025 and may evolve as it progresses through Parliament.
