LWA Blog: Prepare your business for pension reforms

The Government’s upcoming pension reforms are designed to help savers achieve better retirement outcomes. They’ll also bring significant changes for employers too under The Pension Schemes Bill, which is currently progressing through Parliament. The Bill sets out a series of updates to how workplace pensions will be managed, regulated and consolidated over the coming years.

According to Government estimates, the average worker could be £29,000 better off in retirement once the changes are fully implemented. Here’s our blog by our Payroll Services team with everything you need to know.

What are the changes to workplace pensions?

The pension reforms focus on improving value for money, increasing transparency, and simplifying how pension schemes are managed. Key changes include:

• Consolidation of small pension pots under £1,000 into larger, better-value schemes
• Tougher standards for pension providers, who will need to prove their schemes deliver good long-term returns for members
• A move towards larger “megafund” schemes, designed to reduce costs and improve investment opportunities
• New guided retirement products, helping savers make informed decisions when drawing their pensions
• Improved access to pension information through online dashboards that show all savings in one place.

Together, these measures are intended to make pensions fairer, more efficient, and better suited to long-term financial wellbeing.

Why are pension reforms being introduced?

The reforms aim to make pension saving fairer, simpler and more valuable for employees.

For employers, the changes will mean new compliance responsibilities and greater focus on scheme performance. The Government’s workplace pensions roadmap highlights several priorities:

• Consolidating smaller pension pots into larger, better-value schemes
• Setting minimum size and performance standards for default schemes
• Requiring pension providers to prove value for money
• Improving saver engagement through pensions dashboards
• Introducing guided retirement products to support better decisions in later life.

These steps are intended to strengthen the UK pension system, improve long-term returns and ensure employees are getting the most from their savings.

When do the employer pension reforms come into effect?

Timings will depend on when the Pension Schemes Bill passes through Parliament, but the roadmap suggests a phased rollout between 2026 and 2030 for most defined contribution (DC) scheme measures.

Defined benefit (DB) scheme reforms including potential access to surpluses and changes to the Pension Protection Fund levy, are likely to follow between 2027 and 2028.

The key message from Government is that the direction of travel is clear: larger, better-governed pension schemes offering stronger value for savers. Employers should start preparing now to ensure their chosen scheme aligns with that vision.

Automatic consolidation of small pension pots

A major part of the reform is automatic consolidation.

Small pension pots (typically under £1,000), often created when employees move jobs, will be automatically merged into larger, authorised schemes that meet “good value” standards.

For employers, this will reduce the administrative burden of tracking multiple small, inactive pots, and may simplify payroll reporting in the long term.

Pension schemes must prove value for money

Under the new rules, pension providers will need to demonstrate that they offer long-term value, not just low fees. The focus will shift to outcomes such as how well the scheme performs for savers over time.

Employers will need to ensure their default pension scheme meets these requirements. If it doesn’t, you may be required to switch to a different scheme that does. A poorly performing pension scheme could also harm your reputation as an employer and affect staff retention.

Details on consolidation and ‘megafund’ reforms

The roadmap sets out an ambition for a smaller number of large-scale “megafund” pension schemes by 2030, each managing at least £25 billion in assets.

This move aims to reduce fragmentation, lower costs, and increase investment opportunities for schemes – but it also means smaller schemes may need to merge or transfer members.

Employers should check with their pension provider to understand:

• Whether their scheme meets the expected size and value thresholds
• If future consolidation could affect their existing workplace pension arrangements
• How employee benefits and contributions might be managed during any transfer.

Supporting employees in retirement: guided defaults and CDC options

The reforms will also introduce guided retirement default products to help savers make better decisions when drawing their pension.

This means schemes will have to provide clear, practical options at retirement age, reducing the risk of savers making poor investment or withdrawal choices.

In addition, Collective Defined Contribution (CDC) schemes which share investment risk more evenly across members, will be extended to allow multi-employer participation. This could become a new option for some employers in the years ahead.

Improving engagement through pensions dashboards

The introduction of pensions dashboards remains a key feature of the roadmap.

These online platforms will allow employees to view all their pension pots in one place – including workplace and state pensions – helping them keep track of savings and plan for the future.

Employers may start to receive more questions from staff once dashboards are widely available, so being prepared to explain how your company pension scheme fits into the bigger picture will be helpful.

Why pension reforms matter to your business

These reforms will have a direct impact on how employers manage their workplace schemes and communicate benefits to staff. Here are some of the key points to consider for your business:

• Compliance: Schemes that fail to meet value-for-money standards may require changes or replacement.
• Retention and recruitment: A high-quality pension scheme remains one of the most valued employee benefits.
• Operational impact: Consolidation and dashboard reporting may streamline some administrative tasks but require system updates in the short term.
• Financial opportunities: Well-funded DB schemes could benefit from new rules allowing controlled access to surplus funds once the reforms are enacted.

How employers can prepare now for pension reforms

It is a good idea for employers to take a few practical steps to ensure that both your pension arrangements, and your employees, are ready for the changes ahead:

• Speak to your pension adviser: They can help you assess whether your scheme meets the upcoming standards and advise on next steps.
• Review your pension provider: Ask how they’re preparing for consolidation, guided retirement options and dashboard integration.
• Communicate with employees: Keep staff informed as changes roll out to maintain confidence in your benefits package.
• Re-evaluate your pension strategy: This is a good time to consider how your pension scheme supports employee wellbeing and retention.

Pensions Reforms Support from the Payroll Services and Corporate Tax Teams at LWA Accountants & Business Advisors

By taking early action, employers can stay ahead of the upcoming changes to workplace pensions, protect compliance, and continue offering a pension scheme that supports employees’ long-term financial wellbeing.

For further information, advice or support bespoke to your business, you can speak to the Payroll Services or Corporate Tax teams at LWA, on 0161 905 1801 in our Manchester office, or 01925 830 830 for our Warrington branch.

For further details from Gov.uk, you can read the full briefing called Workplace Pensions: A Roadmap.