Pension Schemes Act 2026: The UK CFO’s Compliance Action Plan

The Pension Schemes Act 2026, which received Royal Assent on 29 April 2026, represents the most significant reform of defined contribution pension arrangements since auto-enrolment, with direct implications for every UK CFO managing employer pension cost and compliance strategy.

What Does the Pension Schemes Act 2026 Actually Change for Employers?

The Act sets a statutory framework for five years of pension reform, with the defined contribution sector bearing the greatest structural impact. For CFOs, the headline changes are consolidation, value for money reporting, and new trustee duties on retirement income — each of which has a direct bearing on employer cost, scheme governance, and workforce planning.

The Act creates a new compulsory pot consolidation mechanism: DC pension pots worth £1,000 or less that have been inactive for 12 months will be automatically transferred to an authorised consolidator scheme unless the member opts out. The government anticipates commencement from approximately 2030, with regulations and consolidator authorisations to be established before then. This directly affects CFOs at organisations with high employee turnover — small dormant pots accumulate rapidly in sectors such as retail, hospitality, and logistics.

A new value for money framework for trust-based DC schemes mirrors the FCA’s framework for contract-based schemes. Trustees must assess and report whether their scheme delivers good outcomes for members — and demonstrate this to The Pensions Regulator. Underperforming schemes face wind-up or consolidation into master trusts. CFOs sponsoring smaller occupational DC schemes should assess whether their current arrangement meets the incoming VFM threshold.

Executive Action:

• Request a full actuarial review of your occupational DC scheme against the forthcoming value for money criteria — early identification of underperformance avoids a disorderly wind-up later.
• Map your workforce turnover patterns to estimate the volume of small dormant pots you generate annually and model the administrative and cost implications of the consolidation regime.
• Engage your pension trustees and scheme advisers now on VFM framework readiness — the FCA has already published its equivalent framework for contract-based schemes, which sets the benchmark.

What Are the New Trustee Duties on Retirement Income — and Why Do They Matter to CFOs?

One of the Act’s most consequential measures is the duty on trustees of occupational DC schemes to offer one or more default retirement solutions providing regular retirement income for scheme members. This addresses the post-freedom-and-choice problem where millions of DC savers reach retirement without any default pathway, leading to poor drawdown decisions and depleted savings.

According to the Department for Work and Pensions, the Act is projected to deliver a retirement boost of up to £29,000 for millions of savers through improved investment returns and lower charges — a Government headline figure designed to build political support for the reform. For CFOs, the significance is different: employers whose DC schemes fail to offer adequate retirement income pathways may face reputational consequences and increased financial wellbeing costs in the workforce.

The Act also introduces new collective defined contribution provisions, expanding the framework pioneered by Royal Mail to allow multi-employer CDC schemes. CFOs at large employers with high employee numbers should assess whether a CDC solution provides better value than their current DC arrangements, particularly in the context of the VFM reporting requirement.

Executive Action:

• Brief your pension trustees on the new default retirement income duty and assess whether your existing scheme design includes a compliant retirement pathway by the time regulations are enacted.
• Evaluate whether CDC is appropriate for your workforce profile — the Dentons 2026 analysis notes this opens a new chapter in pension provision for large-employer DC arrangements.
• Include pension reform risk in your three-year finance and people strategy — the Act creates a statutory reform agenda running to at least 2030, with multiple tranches of secondary legislation to follow.

How Should CFOs Model the Cost Implications of the Act?

The Act’s financial implications for employers are indirect but material. Consolidation of small dormant pots reduces long-term administrative costs but may increase short-term member communications obligations. Schemes that fail VFM assessments face wind-up into master trusts, which carries transition costs and changes to employer contribution structures. CDC schemes, once multi-employer models are available, will require new cost-sharing and governance arrangements.

According to Norton Rose Fulbright’s 2026 analysis of the Act, the cumulative effect of the measures represents the most significant reform of defined contribution arrangements since auto-enrolment. CFOs who treat this as a routine compliance exercise will underestimate the multi-year financial modelling it demands.

The pensions dashboard — the digital infrastructure through which members can view all their pension pots in one place — underpins the consolidation mechanism. CFOs should ensure their scheme’s data quality is sufficient to meet dashboard connection requirements, since poor data creates compliance risk and delays member access to the consolidation process.

For CFOs looking to assess their current scheme’s compliance position, the financial governance assessment tools at INFORMD provide a structured framework for evaluating pension and benefits exposures at board level.

Executive Action:

• Commission a three-year pension cost model covering VFM assessment scenarios, pot consolidation flows, and potential scheme wind-up transition costs.
• Audit member data quality across your DC scheme to ensure pensions dashboard readiness — poor data is both a compliance risk and a barrier to member engagement.
• Include the Pension Schemes Act reform timeline in your board’s regulatory risk register, covering the key secondary legislation milestones expected between 2026 and 2030.

How Should CFOs Present Pension Reform Risk to the Board?

The board’s role under the UK Corporate Governance Code is to oversee the organisation’s risk management framework and ensure material risks are properly identified and managed. The Pension Schemes Act 2026 creates a new category of regulatory risk that sits at the intersection of people strategy, financial planning, and scheme governance — all of which require board-level visibility.

CFOs should present a pension reform briefing to the board covering four dimensions: the legislative timeline and secondary regulation milestones; the VFM assessment status of the current scheme; the financial modelling of consolidation and potential wind-up scenarios; and the workforce implications of retirement income adequacy. The audit committee should receive the scheme’s VFM assessment as part of its risk oversight programme.

Directors under the Companies Act 2006 have a duty to have regard to the interests of employees — pension adequacy is an increasingly material dimension of that duty, particularly as the workforce retirement income gap widens. Boards that can demonstrate they have actively governed pension reform risk are in a materially stronger position if challenged by scheme members, regulators, or institutional shareholders on workforce welfare.

Executive Action:

• Add Pension Schemes Act 2026 to the board risk register as a standing item, with a CFO-owned action plan updated at each secondary legislation milestone.
• Brief the remuneration and audit committees on the Act’s implications for workforce benefit costs and scheme governance obligations.
• Ensure the board’s annual review of pension arrangements — required under the UK Corporate Governance Code — explicitly addresses VFM, consolidation readiness, and retirement income adequacy.

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