Pension holders are being informed about four significant changes set to take place in 2026, including the introduction of dashboards, advice reforms, and a new £1,000 rule. These planned reforms aim to provide individuals with improved access to their funds and enhance their understanding of their financial situation.

However, alterations to taxation could result in financial implications for many, potentially prompting numerous schemes to reconsider their operational strategies, according to industry experts.

And a new ‘£1,000 rule’ will mean small pension pots worth £1,000 or less will be brought together into larger pension schemes. The legislation was passed at third reading on the nod and will go to the House of Lords for further scrutiny.

This new initiative will tackle what the government described as the growing problem of small, forgotten pension pots that many people accumulate as they move between employers over their working lives.

There are now 13 million of these small pots, holding £1,000 or less, with the number increasing by around one million a year.

Dashboards

The legal deadline for pension schemes to integrate with pension dashboards is set for 31 October 2026. Trustees are advised to ensure that their scheme administration agreements encompass work related to these dashboards.

Jonathan Watts‐Lay, director at WEALTH at work, explained to Sky Money that these dashboards will consolidate all of an individual’s pensions into one viewable location, thereby facilitating more informed decisions regarding their financial future.

The Financial Conduct Authority (FCA) is gearing up to launch a new Targeted Support scheme, anticipated to be introduced in April 2026. This initiative aims to bridge the gap between general guidance and fully regulated financial advice.

Authorised firms, such as banks, building societies, pension providers or even employers involved with a workplace pension scheme, will be able to provide customised suggestions to groups of individuals with similar financial profiles. This approach will make support more accessible and affordable for those who may not typically seek comprehensive advice.

The Pension Schemes Bill.

Anticipated to become law by mid-2026, the Pension Schemes Bill seeks to address:.

With approximately 13 million dormant pots valued under £1,000 – increasing by one million annually – consolidation is viewed as an essential measure. A newly established Small Pots Delivery Group is creating the framework for transferring qualifying pots to approved consolidators, with legislation expected to come into force around 2030.

The bill also establishes “guided retirement”, mandating defined contribution schemes to provide default pension benefit solutions that transform savings into retirement income.

The Government plans for the proposed legislation to enhance benefits for members of defined contribution pension schemes by supplying them with greater information about their pensions and retirement choices, consolidating savings pots and securing improved returns.

Contentiously, the Bill contains a reserve power that would compel pension schemes to invest in productive assets designed to benefit the UK economy, sparking concerns that this might interfere with trustees’ duty to act in their members’ best interests.

In a report, the Labour-led Delegated Powers and Regulatory Reform Committee observed it featured no fewer than 119 delegated powers allowing ministers to create secondary or subordinate legislation at a later stage.

It stated: “For that reason, we have found it exceedingly difficult to provide meaningful comment on the Bill precisely because it is so skeletal.”

Salary sacrifice

Salary sacrifice changes From April 2029, only the initial £2000 of pension contributions that workers make through salary sacrifice annually will be exempt from National Insurance contributions (NICs).

Despite the changes not coming into force until 2029, specialists at Addleshaw Goddard anticipate that numerous employers will reassess their pension schemes this year in preparation for the alterations.

Death benefits and Inheritance Tax.

Starting from 6 April 2027, certain death benefits will fall under the inheritance tax framework, marking a substantial shift in trustees’ and scheme administrators’ tax obligations and liabilities.

Addleshaw Goddard noted this creates fresh “pain points” and expanded potential for conflicts with beneficiaries and personal representatives.

“Schemes may be required to partially withhold death benefits for a period or pay IHT direct to HMRC. Non-compliance could render trustees liable for IHT, interest and possibly beneficiary financial loss. Trustees must now plan for the new regime by identifying which death benefits are in scope, updating member communications, and most importantly reviewing processes and agreements with third party administrators / insurers to try to reduce / allocate risks. Trustees may also want to consider the adequacy of existing trustee protections such as insurance, scheme rules’ protections and administrator SLAs and indemnities.”