Pension Schemes Act 2026: What UK Employers Must Act On Now

The Pension Schemes Act 2026 received Royal Assent this year, placing legally binding obligations on UK employers that CFOs, CHROs, and boards cannot defer. The Act consolidates the DC pensions market, introduces a formal value for money (VFM) framework, and gives the Pensions Regulator new enforcement teeth — with consequences for organisations that fail to keep pace.

This is not a pensions-only issue. The Act intersects with employer duty, board governance, fiduciary responsibility, and workforce strategy at the highest level. Senior leaders who delegate this entirely to HR or treasury risk missing the window for orderly compliance.

What Does the Pension Schemes Act 2026 Actually Require of Employers?

The Act introduces three obligations with direct relevance to employer organisations. First, trust-based defined contribution (DC) schemes must now operate within a statutory value for money framework. Trustees — and by extension sponsoring employers — must assess their scheme annually against VFM ratings that compare investment returns, costs, and member outcomes against market benchmarks. Schemes that cannot demonstrate value will face consolidation pressure from the Pensions Regulator.

Second, multi-employer DC schemes used for automatic enrolment must hold a minimum of £25 billion in total assets by 2030 to continue qualifying for auto-enrolment contributions. Research from LCP estimates this requirement will accelerate a wave of scheme mergers and exits, with smaller master trusts and legacy arrangements particularly exposed. Employers currently using sub-scale schemes should expect their provider to initiate a transition — and should be reviewing their own readiness now.

Third, the government has signalled that large employers may face periodic mandatory reviews of their pension scheme’s performance, with the possibility of a required board-level appointee with oversight responsibility for pension governance. While secondary legislation confirming this requirement is still pending, the direction of travel is clear: pension governance is moving onto the board agenda whether organisations prepare for it or not.

Executive Action:

• Instruct your HR and treasury teams to identify which pension scheme(s) the organisation sponsors or uses, and whether any fall below the £25bn threshold by 2030.
• Request a board-level briefing on your current scheme’s VFM rating and what a consolidation or migration would involve operationally.
• Designate a senior executive — likely the CFO or CHRO — as the named lead for pension governance, in anticipation of formal board appointment requirements.

How Does the Mansion House Accord Change Your Investment Picture?

Running alongside the Act is the Mansion House Accord, under which 17 major pension scheme signatories have committed to investing at least 10% of their main default funds in private markets by 2030, with half of that allocation — 5% of total assets — directed into UK-based assets. According to government estimates, this could mobilise up to £50 billion of pension capital into UK infrastructure, private equity, venture capital, and private credit over the next five years.

For employers, this shift matters in two ways. If your scheme is an Accord signatory, or migrates to one, your members’ pension savings will increasingly be invested in less liquid, longer-duration assets. Trustees and employers will need to understand the implications for member communications, liquidity planning, and the scheme’s VFM assessment. For UK corporates, particularly those in infrastructure, energy, or private markets, this also represents a significant new source of domestic institutional capital — and a strategic opportunity to engage.

The Pension Schemes Act 2026 gives the Pensions Regulator a mandation power over asset allocation, albeit one that trustees can challenge where compliance would not serve members’ interests. This creates a new dynamic in the trustee-employer relationship that boards of sponsoring organisations need to understand.

Executive Action:

• Ask your pension adviser whether your default fund provider has signed the Mansion House Accord, and what the private markets allocation timeline looks like.
• If your organisation operates in infrastructure or real assets, explore whether your pension scheme’s new private markets mandate creates a relationship-building opportunity.
• Review member communications strategy ahead of any shift in investment mix — employees increasingly scrutinise where their pension is invested.

What Should Your Board Be Doing Right Now?

The most immediate board action is a pension governance audit. This means understanding which schemes you sponsor or use, whether those schemes are compliant with the new VFM framework, and whether your trustee governance arrangements are fit for the obligations the Act now places on them. Many boards have historically treated pension oversight as an HR or finance sub-function. The Act changes that calculus.

According to Linklaters’ May 2026 analysis of the Act, the new requirements create “both opportunities and challenges for trustees and employers of occupational pension schemes,” with the most significant challenge being the pace at which the Pensions Regulator is expected to use its new powers. Regulatory references to the FCA, enforcement action against trustees, and civil sanctions for employers that fail their VFM duties are all now firmly in scope.

Boards should also review whether their current pension arrangements support the organisation’s talent and retention strategy. In a tighter executive labour market, the quality of an employer’s pension provision — including the investment approach and the scheme’s VFM standing — is increasingly a factor in senior appointments. INFORMD tracks these intersections between regulatory change and board strategy so that senior leaders can respond with clarity rather than catch-up. Explore the executive tools and assessments available on the platform, or review the capital approval and strategy templates relevant to pension governance decisions.

Executive Action:

• Add a pension governance item to your next board or audit committee agenda, with a specific focus on VFM compliance and the 2030 consolidation timeline.
• Instruct legal or compliance to assess your trustee appointment arrangements and whether they meet the new knowledge and understanding requirements under the Act.
• Benchmark your pension provision against peer organisations — talent teams should be able to speak to this in senior hiring conversations.

What Are the Consequences of Moving Too Slowly?

The Pensions Regulator has new statutory powers under the Act to compel consolidation, issue improvement notices, and impose civil penalties on schemes and employers that fail VFM assessments or breach the scale requirements. Organisations that delay reviewing their pension arrangements risk being caught in a reactive consolidation process they did not choose — with less control over scheme selection, transition costs, and member impact.

There is also a reputational dimension. As pension investment practices become more transparent — through mandatory VFM ratings and new data disclosure requirements taking effect from early 2026 — scheme performance will become visible to employees, unions, and the press in a way it has not been before. Boards that cannot explain their pension governance approach are in an uncomfortable position.

The Pension Schemes Act 2026 is a structural shift, not a compliance tick-box. The organisations that benefit from it will be those whose boards treat it as a strategic question — one about capital, talent, governance, and the organisation’s obligations to the people who work for it. Visit the INFORMD briefing library for further regulatory intelligence relevant to your board’s agenda.

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Frequently Asked Questions

Does the Pension Schemes Act 2026 apply to all UK employers?

The Act applies broadly to employers that sponsor or use trust-based occupational DC pension schemes, including those used for automatic enrolment. Employers using contract-based personal pension arrangements (such as group personal pensions) are less directly affected by the consolidation and VFM provisions, but should still review their scheme selection given the regulatory direction of travel and talent considerations.

What is the value for money framework and when does it take effect?

The VFM framework requires DC pension schemes to assess their performance annually across investment returns, costs, and member outcomes, producing a rating of green, amber, or red. Schemes rated red will face pressure from the Pensions Regulator to consolidate or improve. The framework is being phased in through 2026 and 2027, with the Pensions Regulator expected to begin active enforcement from 2027 onwards.

What is the Mansion House Accord and does my scheme have to sign it?

The Mansion House Accord is a voluntary commitment, not a statutory obligation. However, the Pension Schemes Act 2026 does give the Pensions Regulator a mandation power over asset allocation, which could effectively require schemes to invest in private markets if the Regulator deems it in members’ interests. Employers should treat the Accord targets as a strong signal of where the regulatory and political consensus is heading, regardless of whether their scheme has formally signed.

Should the CEO or CFO own pension governance at board level?

Ownership depends on your organisation’s governance structure, but in most cases the CFO or CHRO is the most natural board-level lead — the CFO where pension liabilities are material to the balance sheet, the CHRO where the primary focus is member outcomes and workforce strategy. What the Pension Schemes Act 2026 makes clear is that the days of pension governance sitting entirely outside the boardroom are over. A named senior executive with accountability, supported by a clear escalation path to the full board, is now the expected standard.

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