The bill was passed by the House of Lords last night
The House of Lords has accepted a final draft of the Pension Schemes Bill after further government concessions on mandate amendments.
The bill was passed by the House of Lords last night (28 April) after four ping-pongs between the two parliamentary houses – a move that paves the way for the bill's Royal Assent.
As part of the final government amendment agreed by the House of Lords, the bill will include hard statutory caps limiting mandation at 10% of a default fund, 5% of which may be directed into UK assets.
In addition, the reserve power will not be able to be used before 2028 and expires in 2032 if unused. It will be repealed entirely in 2035, even if used.
The mandation power is also restricted to apply only to the default auto-enrolment fund.
Disappointments remain
Independent Governance Group head of policy and external affairs Louise Davey said she was pleased the government had backed down on the issue of mandation.
She said: "The core principle of effective trusteeship is the ability to act in the best interests of their members, consistent with their fiduciary duties. Mandation flies directly in the face of this. We're pleased to see that the government has backed down and significantly reduced its proposal, however, it still has clear remnants of a mandation-led approach, which has no place in a healthy and fully functioning pension ecosystem."
LCP agreed it was disappointing that the mandation measure remained in the bill given significant industry concerns but it welcomed the restrictions agreed.
Defined contribution (DC) partner Stephen Budge explained: "This now includes the final amendment to reference competitive pricing pressures which could restrict master trust and group personal pension investment into UK private markets."
The Pensions Management Institute said it was pleased there were now "guardrails" in place.
Chief strategy officer Helen Forrest Hall said: "We fully supported the Lords in opposing a sweeping reserve power to require specific asset allocations and are pleased that the government has introduced important guardrails."
A historic moment
Despite concerns about mandation, the industry welcomed the bill.
Pensions UK chief executive Julian Mund said the passage of the bill was "a victory" for pension savers.
He said: "The legislation enacts a series of critical reforms that will improve the value savers get from pensions and make the system easier to navigate for employers and savers."
People's Partnership chief executive Patrick Heath‑Lay agreed - noting this was "a historic moment" for the UK pensions market.
He said: "The Bill contains several important market reforms that will drive scale and efficiencies, while ultimately ensuring that better value is delivered to millions of pension savers. These changes will further strengthen the UK pensions system and help it drive investment into the wider UK economy."
Heath‑Lay added: "These reforms are only the beginning, and the needs of savers must be kept firmly at the heart of this evolving process to future proof retirement saving. We look forward to working constructively with government, regulators and alongside the industry to ensure the measures are implemented in a way that builds on the success of auto-enrolment and delivers meaningful long‑term benefits for savers."
LCP added the passing of the Pension Schemes Bill was also "great news" for UK defined benefit (DB) schemes.
Partner and head of pensions developments Jon Forsyth added: "The new rules around surplus – as well as a permanent regime for the superfund market – will give valuable flexibility to schemes, and when used in the right circumstances can mean better outcomes for members and sponsors alike. Meanwhile the legislation to deal with the Virgin Media judgment provides a pragmatic way forward. Combine that with the changes expected to result in zero PPF levies and you have a valuable set of wins for the DB industry."
LCP partner and head of DB consolidation Laura Amin noted the passing of the bill would also be the first step in establishing the legal framework applicable to the authorisation and supervision of DB superfunds, to replace The Pensions Regulator's (TPR's) interim regime.
She said: "Combined with the growing momentum in the superfund market, with Clara having announced its fifth deal just last week, I expect this will give investors confidence and pave the way for further new providers to enter the market and will also give pension scheme trustees and sponsors the confidence that DB superfunds are a robust model to which to entrust their members' pensions.
"The bill also provides for the simplification of the gateway tests for schemes to transfer to superfunds and we expect this will open up the market of schemes considering DB superfund transfers from current levels. So the supply and demand side factors are lining up for 2026 to be a pivotal year for the superfund market."
Detailed consultation begins
The passing of the bill will pave the way for a wide-ranging programme of consultations that will shape how key reforms are implemented across both the DC and DB markets.
A series of consultations will now set to lay out the detailed rules behind the headline policy direction.
On the DC side, a consultation on value for money (VfM) will focus on detailed metrics, benchmarking and comparator data, alongside potential intervention thresholds that could enable regulator-led consolidation or scheme closure. It will also cover enhanced disclosure requirements and alignment between The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA).
A separate consultation on DC decumulation and default pension benefit solutions will define what constitutes a default at retirement. This includes income objectives, longevity risk considerations, trustee duties for non-engaged members, and how default pathways interact with drawdown and annuity products.
Further consultations on DC consolidation and so-called megafund requirements is expected to set out the framework for schemes targeting £25bn scale, with key discussion on the transition pathways for sub-scale scheme and further consideration exemptions, governance standards and safeguards for without-consent transfers.
Alongside this, small pots consolidation will need to examine automated consolidation mechanics, default receiving schemes, opt-outs, and integration with pensions dashboards and data frameworks.
On the DB side, surplus extraction rules will consider funding thresholds (moving towards a low dependency basis), actuarial certification requirements, trustee decision-making duties, member protection safeguards, and interaction with the 25% tax charge.
In parallel, a DB superfund framework consultation is likely to be required to define the operational regime for superfunds, including authorisation criteria, capital buffers, ongoing supervision requirements, and trustee transfer tests.
Further supporting consultations are expected in H2 2026, including updates to TPR statutory guidance, FCA rule alignment for contract-based schemes, and follow-on work on pensions tax and CDC guidance.
Broadstone head of policy David Brooks said: "With the Pension Schemes Bill nearing Royal Assent, attention now turns to a significant programme of detailed consultations that will determine how these reforms operate in practice across DC and DB.
"The measures coming forward are highly inter-related, covering value for money, consolidation, decumulation and endgame options, and the challenge will be to ensure they are developed in a coherent way rather than in isolation."
Brooks said the next phase of consultations would need to keep a clear focus on how these reforms improve member outcomes in practice.
He said: "With a rolling pipeline of consultations expected over the next 12 to 24 months, trustees and employers will need to remain closely engaged as the detail is shaped."
