The Pension Schemes Act 2026 — Changes you need to know about

The Pension Schemes Act 2026 finally became law via Royal Assent on 29 April 2026.

It’s a wide-ranging act, not all of which is directly relevant to employers looking to manage their pension schemes and employee/employer contributions properly.  We’ve talked about a lot of these issues before, but now they’re set in stone (until the next pensions act), it’s worth taking a look at them again.

Some are really positive, like the more straightforward mechanisms for recovering surplus from an ongoing defined benefit (final salary-type) scheme, and providing a route out of the Virgin Media issues we’ve talked about before, where some historic changes to scheme rules may have been invalid, if, contrary to industry expectations, an actuary hadn’t certified them at the time.

Recovery of Surplus

We’ve talked a lot about the fact that a lot of pension schemes, both public and private have for the first time sometimes in a generation been in generous surplus (they have more funds available than are needed to provide all promised benefits).

Although most schemes require members also to contribute, they only need to do so once.  Any shortfall, or deficit, in funds, must be made up by the scheme’s employers.  For the past couple of decades, this has been one-way traffic.  Most schemes moved into deficit and stayed there.

Now a lot of schemes are in surplus, previously the only way to get that surplus out of private sector scheme was to wind it up (except in the rare cases where the scheme’s rules permitted a return of surplus, subject to whatever conditions it imposed, and the existing statutory requirements, while the scheme continued).  That was very much a ‘one and done’ process, and could in itself take a lot of time and cost to achieve.

The Act makes this more straightforward, including for example the removal of the need for the trustees to conclude that a return was in members’ interests (a very hard test to meet).  It will also reduce the level of funding that needs to be met before surplus may be returned.  We await the detail in regulations as to precisely how this will work.

We should always bear in mind that for ongoing schemes, should their financial situation deteriorate following a return of surplus, you as an employer may still have to provide ongoing support.  It is not certain that any pension arrangement will, or should, generate a surplus for the employer over time.

Virgin Media — sorting out the surprising Court decision

We didn’t necessarily expect that the Government would intervene to sort out the problems associated with the Virgin Media decision.  We are very pleased that they have.  We’ve written about this before, but in a nutshell:

• For contracted-out schemes (i.e. those which undertook to match or better for members the various kinds of State Second Pension in addition to regular benefits, in exchange for lower National Insurance contributions) various changes to occupational (trust-based) pension schemes made between 6 April 1997 to 5 April 2016 were found to be invalid if an actuarial certificate was not given.
• The pensions industry, including legal advisers and actuaries, had been working on the basis that these weren’t necessary.

You’ll already know if you have these issues, but the Act provides a way out.  It doesn’t set aside the Virgin Media ruling, but rather permits retrospective confirmation from the scheme actuary that those historical amendments are and always were valid.  It won’t work in all cases, but if the actuary can certify that the changes would not have prevented the scheme from continuing to satisfy the reference scheme test (i.e. one that provided the correct level of contracted benefits), then those amendments were and are validly made for all purposes.

Employer information to pension schemes

The Act inserts a new Clause 11A into the Pension Schemes Act 2008 (the act that set up auto-enrolment amongst other things, which was intended to assist individuals to take control of their pension saving (see also our comments on pension dashboards below)).  This will allow the Government to specify further information that employers must give to employees and workers who do not qualify immediately or at all for automatic enrolment.

Future regulations will make this clear, but we are expecting an obligation to emphasise when they can automatically ask to be enrolled on the same terms as other employees, or when an alternative, if less generous, scheme is available to them.  There may also be requirements for employees or workers who are members of the relevant scheme, and for those who have at some stage been members, although we don’t know exactly what yet.  Watch this space…

Pension Dashboards

The idea behind pension dashboards is that these will allow everyone to understand their complete pension situation, and allow them to take more control of their savings for retirement.  They would operate whereby an individual to easily check all of their pension entitlements, state and private, personal and employer-sponsored in one place.  It’s started with state and public sector pensions, and is gradually being expanded.

The responsibilities as this develops are largely on the big pension providers and trustees to provide access to the data needed to provide the overall information, rather than you as the employer.  You may however find your trustees, if you sponsor this kind of scheme, coming to you for information about historic staff employment and pay, if their data seems to be incomplete or out of date.   You may also find them coming to you, depending on what your trust deed says about funding the scheme’s operations, asking for funds to allow a decent data cleansing exercise to take place, so that the data they provide, and indeed on which they operate, is as good as it can be.

On the whole, the Act is a good one for employers, and can perhaps to some extent balance the more negative recent changes, for example taxing salary sacrifice above a certain level, that have also been made.