Major pension reforms will give people better access to their money and make it easier to understand their retirement savings – but some changes will hit taxpayers in the pocket
14:43, 01 Feb 2026Updated 15:08, 01 Feb 2026
People with workplace and private pensions are being informed of major changes in 2026 to be aware of(Image: Getty Images)
Anyone with a pension is being warned of four crucial changes coming in 2026 including dashboards, guidance and a new £1,000 rule. Several reforms are being planned which will provide people with improved access to their funds – and make it simpler to understand what is happening.
However, there are also modifications which will see people affected financially with alterations to taxation – meaning numerous schemes will consider changing how they function, according to some specialists.
The Pension Schemes Bill
Anticipated to receive Royal Assent by mid-2026, the Pension Schemes Bill seeks to address:
- Underperforming schemes
- The issue of multiple small pension pots created through auto‑enrolment.
With approximately 13 million dormant pots valued below £1,000 – increasing by one million annually – bringing these together is regarded as essential. A newly established Small Pots Delivery Group is creating the structure for transferring qualifying pots to approved consolidators, with the legislation expected to come into force around 2030.
The bill additionally introduces “guided retirement”, mandating defined contribution schemes to provide default pension benefit options that transform accumulated savings into retirement income.
Ministers intend the proposed legislation to enhance outcomes for defined contribution pension scheme members by supplying them with greater information regarding their pensions and retirement choices, consolidating savings pots and delivering improved returns.
Contentiously, the Bill contains a reserve power that could compel pension schemes to invest in productive assets designed to support the UK economy, prompting worries that this might conflict with trustees’ obligation to act in their members’ best interests.
In a report, the Labour-led Delegated Powers and Regulatory Reform Committee observed it featured no fewer than 119 delegated powers allowing ministers to create secondary or subordinate legislation subsequently.
It stated: “For that reason, we have found it exceedingly difficult to provide meaningful comment on the Bill precisely because it is so skeletal.”
Pension dashboards.
The statutory deadline for schemes to link to pensions dashboards is 31 October 2026. Trustees should ensure their scheme administration agreements encompass dashboards-related work.
Jonathan Watts‐Lay, director at WEALTH at work, told Sky Money the dashboards will provide people with a view of all their pensions in one location, helping them make more informed decisions about their financial future, reports Yorkshire Live.
The Targeted Support regime.
The Financial Conduct Authority (FCA) is preparing to launch a new Targeted Support scheme, anticipated in April 2026. The regime is designed to bridge the gap between broad, generic guidance and fully regulated financial advice.
Authorised firms – for example, banks, building societies, pension providers or even employers working with a workplace pension scheme – will be able to offer tailored suggestions to groups of individuals who share similar financial characteristics, making support more accessible and affordable for those who may not seek full advice.
Salary sacrifice changes
From April 2029, only the first £2000 of pension contributions that an employee makes via salary sacrifice each year will be exempt from National Insurance contributions (NICs). While the changes won’t come into force until 2029, experts at Addleshaw Goddard anticipate many employers will reassess their pension arrangements this year ahead of the modifications.
Death benefits
From 6 April 2027, certain death benefits will fall under the inheritance tax regime, marking a substantial shift in trustees’ and scheme administrators’ tax obligations and liabilities. Addleshaw Goddard noted this creates fresh “pain points” and expanded potential for disputes with beneficiaries and personal representatives.
“Schemes may be required to partially withhold death benefits for a period or pay IHT direct to HMRC. Non-compliance could render trustees liable for IHT, interest and possibly beneficiary financial loss. Trustees must now plan for the new regime by identifying which death benefits are in scope, updating member communications, and most importantly reviewing processes and agreements with third party administrators / insurers to try to reduce / allocate risks. Trustees may also want to consider the adequacy of existing trustee protections such as insurance, scheme rules’ protections and administrator SLAs and indemnities.”