Pensions: The next wave of reforms across UK and Europe

Foreword

With many significant pension reforms already in train to address the declining ability of governments and employers to guarantee retirement incomes in the face of an ageing population, 2026 is set to be another transformative year for workplace and personal pensions in the UK, Ireland and Northern Europe.

In the UK, the Pension Schemes Bill will continue to take centre stage until it receives Royal Assent in the Spring, with private market investments and decumulation strategies being key areas of focus.

In continental Europe, pension providers will need to digest reforms proposed by the European Commission to the rules for IORPs (Institutions for Occupational Retirement Provision).

And at national level, 2026 will be an important year in the Netherlands for operationalising the shift from DB to DC.  In Germany, the government is expected to overhaul workplace and personal pensions; and in Ireland, the Government is launching DC auto-enrolment.

UK pension reforms: Addressing member risk, investments, value and adequacy

Following the launch of auto-enrolment in 2012 and the introduction of pension freedoms in 2015, the UK is undergoing a further phase of major reforms to occupational pensions, covering defined benefit (DB), defined contribution (DC), and the local government pension scheme (LGPS).

The reforms – the details of which will be set out in 2026 – aim to address four key themes:

Theme 1: De-risking retirement for pension savers

With a significant majority of workers now saving into a DC pension, the government is introducing two new pathways to support members of occupational DC schemes to access retirement solutions.

Until now, members have essentially had two options at retirement: seek the help of a financial adviser; or ‘go it alone’.  However, to address the growing number of people relying on their DC pension savings to generate an income in retirement, the government is introducing two additional pathways:

•  A default retirement income solution/s to remove the need for members of trust-based (and later, contract-based) schemes to consider investment or longevity risk;
•  A supported pathway (using Targeted Support), in which providers are able to suggest appropriate retirement products or solutions to cohorts of scheme members, without the cost of holistic financial advice.

Alongside these measures, the government is consulting on plans for multi-employer schemes to provide retirement Collective DC (CDC) schemes, with draft regulations to be laid next year. Under retirement CDC, members would be able to pool investment and longevity risk – and such schemes could be provided by trustees as part or whole of a default retirement solution.

Theme 2: Diversifying investments

One of the major drivers of government moves to scale-up workplace DC default schemes (minimum default arrangement AUM of £25bn by 20230) and local government pension scheme pools is the increased ability to invest in alternative asset classes – including UK private market assets.

Through the recent Mansion House Accord, the majority of major occupational DC schemes have committed to invest 10% of their default fund in private market assets, half of which should be in UK assets, by 2030.

To help operationalise the Accord, the government has launched the Sterling 20 group, through which it aims to develop and co-design investment opportunities in sectors such as housing, energy, and other infrastructure – with politicians looking for tangible progress in 2026/27.

Similarly, through the mandated pooling of LGPS assets and a reduction in the number of pools from eight to six (deadline, March 2026), the government hopes to increase investments in private market assets, including at a local level.

Theme 3: Increasing member value

2026 may also prove to be the critical year for the long-awaited value-for-money framework for DC schemes being developed by the FCA, The Pensions Regulator and the government. Ministers hope that comparable disclosures on investment performance, net returns and service quality will help shift employers’ focus in scheme selection from ‘lowest cost’ to ‘best overall member value’ – leading to improved outcomes for pension savers.

A joint consultation from the FCA and TPR is expected in the coming months before the framework is finalised by the end of 2026, with the first disclosures anticipated in 2028.

Theme 4: Improving long-term pension adequacy

While the government and regulators develop detailed rules and regulations in the areas above, in the background, the new Pensions Commission will be gathering research and evidence as it examines the long-term future of the UK’s pension system. Specifically, the Commission will be examining how to improve retirement outcomes, including for those on the lowest incomes, as well as the challenges of supporting an ageing population.

The Commission will present its final report in 2027. However, an interim report in H1 next year would support stronger public and industry engagement as the Commission develops its recommendations for change.

Reforms in Northern Europe: Addressing long-term sustainability and investment challenges

At EU level, the European Commission is expected to set out recommendations to develop workplace and personal pensions – including auto-enrolment – across member states by the end of 2025, as part of the Commission’s Savings and Investments Union initiative.

Although the Commission lacks the competence to act in many areas of pensions policy, it will be hoping that, through 2026 and beyond, EU member states adopt its proposals to develop Europe’s funded pension provision – and in doing so, increase investments in the European economy, including in private market assets.

In addition to auto-enrolment and pensions dashboards, a key area of focus will be the extent to which rules governing investments made by providers of multi-employer workplace pensions (the so-called ‘prudent person principle’ in the IORP II Directive) are made more flexible to allow for higher allocations to alternative, unlisted assets.

At national level, in Germany, the draft Company Pension Strengthening Act II (BRSG II) is expected to become law in early 2026.  Among the expected changes, the law would enable employers to introduce auto-enrolment (with opt-out) without a collective bargaining agreement in place, subject to minimum employer contributions.

The Act would also enable (mostly smaller) companies that aren’t subject to collective bargaining agreements to access the DC pensions models of companies or industries that do have collective bargaining, expanding the Social Partner Model (Sozialpartnermodell).

In addition, on top of introducing the new Early Start (Frühstartrente) state-funded pension contributions for school-aged children, we expect the German government to set out detailed proposals to overhaul the ailing Riester personal pension regime. Expected changes include the introduction of a new product – the Altersvorsorgedepot-Vertrag – which would allow individuals to invest their savings in the capital markets, but without the full capital guarantees of traditional insurance-based products.

In the Netherlands, the workplace pension regime is currently being overhauled to transition from a DB to a DC model, affecting virtually all accrued benefits in Dutch workplace funds. Although the deadline for the transition is 1 January 2028, 2026 promises to be an important year for remaining funds to operationalise the move to either the new Solidarity Premium Scheme (based on collective accrual) or the Flexible Premium Scheme (individual accrual).

And in Ireland, from 1st January 2026, DC pensions auto-enrolment will come into force for all employees not currently contributing to a pension plan.  Contributions for employees and employers will be phased in over 10 years, beginning at 1.5% of salaries in 2026-8.