Big reforms are underway in the UK pensions system, which could have a real impact on people’s retirement plans. WEALTH at work highlights the key changes coming in 2026 and beyond and explore what they mean in practice for pension savers.
Targeted Support regime
The FCA’s consultation in June 2025 unveiled plans to introduce a Targeted Support regime which is planned to launch in April 2026, with applications opening to financial services firms from March. The launch dates are subject to legislation being passed by parliament. This reform would allow authorised firms to provide tailored suggestions to groups of individuals with similar financial characteristics – bridging the gap between generic guidance and regulated financial advice. The goal is to make pension and investment support more accessible and affordable.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “I welcome the initiative, albeit with some reservations. The new regime could help savers to get started and bridge the advice gap and may also encourage disengaged investors to make active choices and get better value from their investments. Targeted support could also help people to understand what is required to generate a desired level of income throughout retirement. However, by design, it’s not holistic and won’t consider all accumulated wealth or personal circumstances. For those with larger sums, regulated advice will remain essential, especially when planning for retirement income.
The Pension Schemes Bill
The Pension Schemes Bill is progressing through parliament and is expected to become law, possibly by mid-2026. The bill aims to tackle underperforming pension schemes and consolidate small pension pots. In addition, the Bill requires defined contribution schemes to offer ‘default pension benefit solutions’ designed to convert members’ savings into a retirement income. This approach is referred to in the legislation as ‘guided retirement’.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “On small pots, whilst auto-enrolment has successfully increased pension participation, it has also led to employees accumulating multiple small pots as they move between jobs. The Department for Work and Pensions estimates there are around 13 million deferred DC pots that are worth less than £1,000, with the number increasing by around one million a year.
Pension consolidation offers an effective remedy – providing people with a clear view of retirement savings and reducing the risk of lost pots. The Small Pots Delivery Group (a collaborative initiative between the government, regulators, and industry stakeholders) have been tasked with setting out how eligible pots will be moved to authorised consolidators. Legislation is likely to come into force around 2030 that require schemes to automatically transfer eligible small pots to authorised consolidators.”
On the topic of default pension benefit solutions as part of the guided retirement proposals Watts-Lay comments; “The legislation terms this as ‘guided retirement’. However, in reality it’s unclear how much actual support will be provided, given that the premise of offering default options is to remove the need for people to make an active choice. There is a real danger that this could lead to a repeat of the issues seen with annuities pre-Freedom and Choice, where individuals defaulted into their providers annuity without exploring better options elsewhere. Retirement needs are highly individual. Some may have other significant assets, others may rely solely on their pension. Health, life expectancy and income preferences vary widely. A generic default solution cannot cater to this spectrum of needs and may result in tax inefficiencies and suboptimal income. People should understand that the default is not the only option and may not be suitable for their needs. Seeking financial education and one-to-one guidance can help them to make informed decisions.”
Pensions dashboard
Throughout 2026, pensions dashboards will start to roll out, with all schemes required to connect by 31 October – although exact connect dates will also depend on scheme type and number of active and deferred members.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “Dashboards will give people a view of all their pensions in one place. This can make it much easier to understand what they’ve built up, spot any gaps, and plan for the income they’ll need in retirement.”
The Pensions Commission
In July 2025, the government revived the Pensions Commission to examine adequacy and recommend reforms, noting risks that future retirees may be poorer than today’s.
Whilst the Commission’s final report isn’t due until 2027, it is expected to address issues such as contribution levels, coverage gaps, State Pension age, demographic disparities, as well as analysis on how workplace pensions interact with ISAs and other savings products, aiming to create a more cohesive framework for long-term financial security.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “While auto‑enrolment is a success in participation terms, adequacy remains a key issue. It is widely recognised that saving the auto enrolment minimum of 8% is not enough for a secure retirement, and that millions are on track for an inadequate retirement. The reforms will be crucial in shaping how people save and plan for retirement.”
Salary sacrifice: NI cap from April 2029
From 6 April 2029, employee pension contributions made via salary sacrifice will only be exempt from National Insurance (NI) on the first £2,000 per tax year. Amounts above the cap will attract employee and employer NI at standard rates. Income tax relief is unchanged with non‑sacrifice employer pension contributions remaining free of NI.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “The changes will affect savers differently depending on their earnings and contribution levels. Most basic-rate taxpayers contributing modest amounts via salary sacrifice will see little or no impact, as their annual contributions often fall below the £2,000 threshold. Those contributing above £2,000 annually will start to lose NI savings, reducing the overall efficiency of salary sacrifice. They may need to increase contributions to maintain retirement targets. Individuals making significant contributions through salary sacrifice will be most affected. The loss of NI relief could substantially increase their cost of saving, potentially discouraging higher contributions. However, it may be wise to consider maximising pension contributions before the changes take place.
What can people do to prepare for all the changes ahead?
“The upcoming pension reforms offer a great opportunity for savers to better understand their pensions, become more empowered, and ultimately achieve the retirement they want.
But people don’t have to wait as now is the time to get ahead of change. Speak to your employer or HR team to see how they can help. Many workplaces offer financial education, guidance, and investment advice to help you make the most of your pension and savings options.
If you’ve got multiple pots from different jobs, ask about pension consolidation services. Bringing them together can give you clarity and better control. Also, look into tax efficient options like Workplace ISAs alongside your pension. This helps build financial resilience and flexibility.
By engaging with your pensions and savings, asking questions, and using the support available through your employer, you can make smarter decisions and achieve better retirement outcomes.”