How the Pension Schemes Bill will impact financial advisers advising on pensions

Having completed its passage through Parliament in late April 2026 following an extended “ping‑pong” between the Commons and the Lords, the Bill is designed to reshape how workplace pensions operate, how value is assessed, and how savers ultimately turn pension wealth into retirement income. 

For financial advisers, the legislation has far‑reaching implications, not only for scheme design and investment strategy, but also for due diligence standards, retirement advice, and ongoing client communications.

1. A shift from “cost” to “value for money”

One of the cornerstone reforms in the Bill is the introduction of a formal Value for Money (VFM) framework across defined contribution (DC) pension schemes. Under this framework, schemes will be required to demonstrate value across a consistent set of metrics, including net investment performance, costs and charges, and quality of service, rather than focusing narrowly on headline fees.

What this means for advisers:

• Adviser due diligence on pension wrappers, master trusts, and workplace schemes will need to explicitly consider VFM outcomes, not just charging structures.
• Comparative assessments between schemes must increasingly reference net outcomes and governance quality, in line with the regulator’s emerging expectations.
• Advisers supporting employers on scheme selection or governance will need to demonstrate how recommendations align with the new VFM disclosures.

This aligns closely with the FCA’s Consumer Duty expectations, strengthening the evidential burden on firms to demonstrate that pension advice delivers good long‑term outcomes.

2. Consolidation of DC schemes and fewer choices

The Bill accelerates consolidation within the DC market, with policy intent focused on creating fewer, larger, better‑governed pension schemes. Multi‑employer DC schemes and master trusts are expected to reach significant scale (often referenced at £25bn of assets), while smaller or underperforming arrangements may be encouraged, or required, to consolidate. 

Adviser implications:

• The number of viable default workplace pension options is likely to fall over time.
• Advisers may see reduced provider choice, but potentially more consistent governance standards.
• Reviews of existing schemes, particularly legacy arrangements, will become more important, as some may no longer meet future regulatory expectations.

For advisers, consolidation increases the importance of ongoing suitability reviews, especially for clients whose pensions are transferred or defaulted into new arrangements as part of market restructuring.

3. Automatic consolidation of small pension pots

The Bill introduces mechanisms to enable the automatic consolidation of small pension pots, addressing the long‑standing issue of savers accumulating multiple dormant arrangements as they change employers. 

What advisers need to watch:

• Clients may see pensions moved without active decision‑making, increasing the need for holistic retirement planning.
• Advisers will need to revisit how consolidated pots fit within broader accumulation and decumulation strategies.
• Clear client communication will be essential, particularly where consolidation affects platform choice, investment strategy or guarantees.

This reform strengthens the case for advised pension planning versus fragmented, scheme‑by‑scheme decision‑making.
 

4. Default retirement income pathways

A major structural change introduced by the Bill is the requirement for pension schemes to offer clear default routes into retirement income, shifting focus beyond accumulation and toward retirement outcomes. 

These defaults are not intended to replace advice but to improve outcomes for non‑advised savers.

Adviser impact:
•    More clients will approach retirement already positioned in a pre‑defined decumulation pathway.
•    Advisers will need to assess whether defaults remain suitable given clients’ wider assets, tax position and income needs.
•    There may be increased need for “at‑retirement” advice, as defaults prompt engagement and decision‑making.

This change reinforces the adviser’s role in adding value at the transition to retirement, an area historically associated with poor consumer outcomes.

5. Investment reform and the “mandation” debate

One of the most contentious aspects of the Bill has been the government’s proposed power to influence pension scheme investment, particularly to encourage investment in UK private assets. Following significant pushback in the Lords, these powers have been heavily constrained and subject to new statutory guardrails. 

What advisers should understand:

• Trustees’ fiduciary duties remain central; investment mandates cannot override acting in members’ best interests.
• Any future intervention is tightly limited and aligned with voluntary industry commitments, such as the Mansion House Accord.
• Advisers should expect greater disclosure around illiquid assets, long‑term return expectations, and volatility within default funds.

For advisers, this reinforces the importance of explaining investment risk, time horizons and outcome uncertainty, particularly where portfolios include private or less liquid assets.

6. Defined Benefit (DB) schemes and surplus release

The Bill also introduces greater flexibility for DB schemes to safely release surplus, with the stated aim of supporting employers and economic growth while maintaining member security.

Adviser considerations:

• Corporate advisers and trustees will require more detailed covenant and risk assessments.
• Individual advisers may field more questions from DB members about scheme security and benefit expectations.
• Clear explanations of protections and regulatory safeguards will be critical to maintaining confidence.

7. Raising the Bar on Adviser Due Diligence

Across all areas, the Pension Schemes Bill raises expectations of documented, outcome‑focused due diligence. Advisers will need to show that pension recommendations:

• consider VFM disclosures
• assess governance and scale
• align with default and retirement pathways
• support good long‑term consumer outcomes.

This dovetails with the FCA’s broader regulatory direction and is likely to feature prominently in future supervisory reviews.

Leading to the conclusion of a more structured and scrutinised pension advice landscape

The Pension Schemes Bill marks a decisive shift toward scale, value, and retirement outcomes. While many reforms target workplace schemes and trustees, their impact flows directly into the advice process, from provider selection and investment strategy to decumulation planning and client communications.

For advisers, the opportunity is clear: those who can evidence robust due diligence, articulate value beyond cost, and guide clients through an increasingly structured pension landscape will be well placed to meet both regulatory and client expectations.