The Pension Schemes Act 2026 (the “Act”) received Royal Assent on 29 April 2026. Much of the commentary surrounding the Act has focused on consolidation, pension “megafunds” and investment in the UK economy. However, for many trustees and employers, the most significant consequences will arise from a series of practical changes that require strategic decisions over the coming years.
While the detail of many reforms will be implemented through regulations, the direction of travel is now clear. Trustees of both defined benefit (“DB”) and own-trust defined contribution (“DC”) schemes should be considering what the new framework means for their governance, member outcomes and long-term strategy.
DB schemes: greater flexibility and new strategic choices
Surplus extraction
One of the most significant DB developments is the introduction of a new framework designed to make it easier for trustees to return surplus to sponsoring employers while schemes remain ongoing.
Historically, surplus extraction has been heavily constrained. Many schemes have been unable to make payments because they lacked the necessary scheme power or had not passed a section 251 resolution.
The Act removes those barriers. Trustees will be able to amend scheme rules to create or amend an existing power to refund ongoing surplus, subject to detailed requirements that will be set out in regulations.
Importantly, the previous requirement that a scheme be fully funded on a buy-out basis before a refund could be made is removed. Instead, Government has indicated that the new regime will be linked to the scheme’s low dependency funding basis.
For many schemes, the legal change may prove less challenging than the governance questions it creates. Trustees will need to consider whether surplus should be retained to strengthen member security, support discretionary benefit improvements or be returned to the employer. Sponsors, meanwhile, may view surplus extraction as an opportunity to access capital that has previously been locked within the scheme.
The reforms are also likely to influence endgame planning. Some employers may become more willing to run schemes on for longer if future surplus can potentially be extracted, rather than pursuing a buy-in strategy. Trustees should therefore expect surplus policy to become a more prominent feature of funding and journey plan discussions.
With regulations expected later this year and implementation anticipated in 2027, if they are not already doing so, now is a good time for trustees and sponsors to begin discussing the journey plan for their scheme.
The Virgin Media remedy
The Act also delivers the long-awaited legislative response to the 2024 Court of Appeal decision in the Virgin Media case.
The judgment created uncertainty for schemes that contracted out between 1997 and 2016. It held that amendments affecting contracted-out rights would be void if the required actuarial confirmation under section 37 of the Pension Schemes Act 1993 had not been obtained.
To address this issue, the Act introduces a remediation process for “potentially remediable alterations”. Broadly, trustees can ask the current scheme actuary to provide retrospective confirmation that an amendment would not have caused the scheme to fail the relevant contracting-out standard.
Where that confirmation is provided, the amendment will be treated as valid.
The legislation also contains helpful provisions for schemes that had already wound up before Royal Assent or had entered the Pension Protection Fund (“PPF”) or Financial Assistance Scheme (“FAS”), deeming such amendments to be valid without further action.
Many trustees have adopted a “watching brief” approach, since the original Virgin Media case, in the hope of increased legal clarity. This approach has been vindicated by the legislative “fix” that is now available. It is now time for trustees to revisit their approach. Options include:
- Maintaining a “watching brief” until we have judgment in the Verity Trustees case, which may or may not help to clarify some other legal aspects
- Adopting a “reactive mode”, given that use of the remedy is not time limited, although noting that the Pensions Regulator in its March 2026 guidance encourages trustees to assess whether their scheme is affected and determine an appropriate course of action
- Proceeding with a detailed analysis of historic deeds, with a view to utilising the remedy if necessary. This will be the preferred option for schemes looking to wind-up during the next few years.
DB Superfunds
The Act also establishes a statutory framework for DB Superfunds.
Successive governments have viewed Superfunds as a potential alternative endgame solution for schemes that are unable or unwilling to pursue the insurance route. The Act provides the basis for an authorisation and supervision regime that could support further growth in this market.
For smaller schemes, Superfunds may provide an additional option alongside run-on and buy-in strategies, while introducing greater competition into a market currently dominated by a single provider, Clara.
Although the market remains relatively immature, trustees undertaking endgame planning may wish to assess Superfunds alongside more established options.
DC schemes: a growing focus on outcomes
Value for Money
The new Value for Money (“VFM”) framework represents one of the most significant changes for DC trustees.
Under the regime, trustees of schemes used for automatic enrolment will be required to assess and disclose how their default arrangements perform against prescribed metrics covering investment performance, service quality, and costs and charges.
The policy objective is clear: to identify schemes that consistently fail to deliver good outcomes and encourage consolidation where members would benefit from being in a larger arrangement.
Although the first assessments are not expected until 2028, trustees of in-scope schemes should already be considering how they will gather data, measure performance and demonstrate value. In practice, the framework is likely to place greater scrutiny on trustee decision-making and on whether it is in members’ best interests for smaller or under-performing arrangements to continue operating independently.
Small pots consolidation
The Act also tackles the issue of the over 13 million dormant small DC pension pots that have been created largely as a by-product of automatic enrolment.
Under the proposed framework, deferred DC pots worth less than £1,000 that have been inactive in for 12 months, will be eligible for automatic consolidation into authorised consolidator schemes unless the member opts out.
While the detail remains to be set out in regulations, the reforms are intended to reduce administrative inefficiencies and make it easier for savers to keep track of their retirement savings.
Implementation is not expected until 2030, but trustees should not underestimate the operational challenge involved. Data quality, member communications and administration processes are all likely to require significant preparation.
Guided retirement
Perhaps the most member-focused reform is the introduction of “guided retirement”.
DC Trustees will be required to offer pension benefit solutions designed to provide members with a regular income in retirement, while allowing members to choose an alternative option.
The policy reflects concerns that many members are struggling to navigate the choices created by the pension freedoms introduced in 2015 and are making poor retirement decisions with limited support.
Trustees will be able to develop a solution within their own scheme or partner with an external provider. In either case, the reforms will require careful planning, robust governance and a clear retirement income strategy.
For many trustees, the challenge will be cultural as well as operational. Historically, governance has focused on helping members accumulate savings. The new regime will require greater engagement with the retirement phase and the outcomes members achieve once they begin drawing benefits.
Looking ahead
The Pension Schemes Act 2026 is one of the most significant pieces of pensions legislation in recent years, yet much of its practical impact will depend on the regulations and guidance that follow.
For trustees and employers, the key message is that the Act is not simply about consolidation or scale. It creates new opportunities, new responsibilities and, in some cases, entirely new strategic choices. Whether considering surplus extraction, Virgin Media remediation, endgame planning, value-for-money assessments or guided retirement, schemes that start planning early will be best placed to respond as the detail emerges.
If you would like to discuss how these changes might affect your scheme, please get in touch with Gemma Hanley, Pensions Partner at law firm Squire Patton Boggs on 0113 2847000 or by email to gemma.hanley@squirepb.com
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