Pensions shake-up: changes that could reshape your retirement

A series of pension changes are on the horizon, but not all of them are bad news for savers. In fact, several upcoming reforms are intended to give people greater clarity, stronger protections and more support when making retirement decisions.

From 2026 to 2029, adjustments will be phased in covering everything from how unused pensions are treated for inheritance tax, to when you can access your savings, and the type of guidance pension providers can offer. While some changes may require savers to rethink parts of their plans, others could help to improve outcomes in later life.

Here’s a timeline of the key policy shifts ahead, and what they could mean for your retirement.

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Pension Schemes Bill

When: expected mid-2026 onwards

The Pension Schemes Bill is a wide-ranging package of reforms to private pensions which aims to improve outcomes for savers and boost UK investment.

Key measures that will impact consumers include:

1. Consolidation of small pension pots

• The Bill provides powers to automatically consolidate small defined contribution (DC) pension pots (e.g. those below £1,000) into larger schemes to avoid fragmentation and lost pots.

2. Value-for-Money requirements

• Trustees (i.e. people in charge of running pension schemes) will have to assess and demonstrate to members that their pension schemes are delivering good value, with new frameworks and reporting to support this.

3. Consolidation of pension schemes

• The Bill will encourage consolidation to ensure larger, more efficient pension schemes. This should mean the pension schemes have better bargaining power and potentially lower charges and better returns for members.

4. Member information and retirement choices

• There are new requirements to improve how savers receive information about their pensions and offer clearer pathways to support those making choices about how to access their retirement income.

5. Reserve powers for productive investment

• The Bill contains broad powers that could be used later to encourage pension schemes to invest more money into UK “productive assets” (for example: infrastructure and small private companies). These assets are potentially higher risk but could also come with the potential for higher returns for pension savers. The powers are really a “last resort” measure as many pension schemes have already committed to doing this.

Royal Assent for the Bill is widely expected in mid-2026, and that the new measures will be rolled gradually after that (most likely through 2027 and beyond).

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Increases to State Pension Age

When: 2026 to 2028

Between 2026 and 2028, the age at which you can claim your State Pension will be rising. It is currently 66 for both men and women and will be going up to 67 by the end of that period.

The increase is being phased month-by-month across this period based on date of birth, so there’s not a single “big bang” date. The change will impact people born between 6 April 1960 and 5 April 1961.¹

• Read: How quickly will UK pension ages rise?

Under current law, the age is set to rise again to 68 between 2044 and 2046. Regular reviews (at least every five years) mean further changes could be proposed and legislated before 2044, potentially bringing future rises forward - but these would still need parliamentary approval.

Targeted Support

When: from April 2026

Targeted support is a new initiative that will allow certain financial companies to provide support to customers that is more than simply generic information but less than full regulated financial advice.

The aim is to better support individuals with complex decisions around their money and overall improve their financial situation.

Under the new regime, authorised firms will be able to offer suggestions to groups of savers with similar circumstances, rather than only broad guidance or detailed personalised advice.

For example, a pension provider might be able to:

• Suggest increasing contribution rates for people who are under-saving for retirement.
• Suggest a more sustainable pension drawdown rate to someone in retirement who is depleting their savings quickly.

These are not personalised recommendations in the full advice sense, but they are more specific and actionable than current standard warnings or information notices.

The new regime will be rolled out from April and companies will need to get a specific regulatory permission from the Financial Conduct Authority (the City watchdog) before offering targeted support to consumers.

Pension dashboards

When: TBC

The aim of pension dashboards is to give people a clear, secure view of all their pensions — including the State Pension — online, in one place for the first time. By bringing everything together, dashboards should make it much easier for people to understand what they have, plan with confidence, and make more informed decisions about their retirement.

• Read our helpful guide on Creating a retirement plan

There isn’t yet a confirmed single date when the public will be able to log on and use pension dashboards. However, all pension schemes and regulated pension providers in scope must be connected to the dashboards ecosystem by 31 October 2026 at the latest.

The first free public dashboard will be one from the government-backed Money and Pensions Service (MaPS). After this date, we should start to see private dashboards being developed.

• Read: Can I protect my ISAs from Inheritance Tax?

IHT on unspent pensions

When: 6 April 2027

Currently unspent pension pots are generally not included in a person’s estate for IHT purposes. However, from April 2027, that will change.

From that point, most unused pension funds and certain pension death benefits will be included in the value of an individual’s estate for IHT purposes.

• Read: What happens when you inherit a pension? | Fidelity

Up to now, many retirees have spent from their ISAs and other savings first, preserving as much of their pension as possible because of the IHT benefits of passing on a pension.

This new legislation could up-end that logic and significantly change where people take their income from in retirement and in what order.

• Watch: Inheritance tax - What people get wrong about the 7-year rule

Cash ISA changes

When: 6 April 2027

If pensions are the bedrock of retirement planning, then ISAs are the flexible layer that sits on top.

In 2027, the annual Cash ISA allowance is expected to be reduced from the current £20,000 to £12,000 for most savers.

It’s common for retirees to hold large cash piles, as they may want to call upon these reserves during a market downturn instead of selling off some of their pension investments at a loss. 

• Watch: How much cash should you hold in retirement?

For many retirees there will be no change, as the reduced £12,000 limit will only apply to under-65s. However, it could still impact those who have stopped working at a younger age (e.g. in their late 50s or early 60s) and want to shelter their cash savings from tax. 

Savers aged 65 and over will continue to enjoy the full £20,000 annual cash ISA allowance.

Increases to Normal Minimum Pension Age

When: 6 April 2028

The earliest age you can access most private pension savings in the UK is set to increase from age 55 to age 57. This is also called the Normal Minimum Pension Age.

From April 2028, the Normal Minimum Pension Age will rise from 55 to 57 for most people, meaning you generally won’t be able to begin withdrawing from your personal or workplace pension without tax penalties until age 57.²

This change applies to those born on or after 6 April 1971, who won’t be able to access pensions at 55 after the new rules take effect.

For people with protected pension ages, earlier access may still be possible depending on the terms of their scheme. Ill-health retirements may also mean people can access their pension before age 57 even after April 2028.

Salary sacrifice limits

When: 6 April 2029

Until now, pension contributions made via salary sacrifice have been exempt from both income tax and National Insurance (NI), making them highly efficient for employees and employers alike. 

However, the Government has announced that, as of April 2029, it is capping the maximum amount of your salary you can sacrifice into a pension without incurring NI to £2,000 per year.

• Read: Will salary sacrifice changes impact me?

Any pension contributions above that £2,000 cap will, from 2029, incur both employee and employer National Insurance contributions. Income tax relief on pension contributions will still apply in the normal way.

It’s important to note that the change does not ban salary sacrifice for pensions: it simply limits the amount that benefits from the National Insurance saving. Overall, salary sacrifice will remain a very efficient way of saving for retirement - particularly if your salary is nearing certain “cliff edges” at which you lose valuable state benefits and tax allowances.

Potential future changes to watch

Pensions are a political hot potato and there are plenty of other potential changes being discussed, including:

• Expanding auto-enrolment (e.g. by lowering the age at which employees are automatically enrolled into a workplace pension)
• Increasing the minimum contributions to workplace pensions via auto-enrolment
• Increasing retirement ages further
• Introducing new measures to help the self-employed save for retirement

These are some of the key topics due to be discussed by the recently formed UK Government Pension Commission, so watch this space.

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• Read: How do I cash out my pension over 30 years?
• Read: Triple Lock: what will the State Pension be in the future?
• Read: How to retire at 55

Source:

¹ State Pension age timetables
² Increasing Normal Minimum Pension Age - GOV.UK

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment.Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before going ahead with a pension transfer, we strongly recommend that you undertake a full comparison of the benefits, charges and features offered. To find out what else you should consider before transferring, please read our transfer factsheet. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you seek advice from one of Fidelity’s advisers or an authorised financial adviser of your choice. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.