New rules will require pension providers to publish performance ratings, making it easier for savers to compare their scheme

Millions of workers could end up with an extra £29,000 in their pension pot under the biggest shake-up of the retirement system in a generation.

The Department for Work and Pensions has unveiled a major package of reforms designed to help around 20 million pension savers get better value from their retirement savings and make it easier to turn those savings into a reliable income.

Under the plans, someone earning an average salary who contributes to a pension throughout their working life could see their retirement savings increase by as much as £29,000.

At the heart of the reforms is a new Value for Money framework, which will require pension providers to measure and publish how they perform against the best schemes on the market for the first time.

The framework has been developed with the Pensions Regulator, the Financial Conduct Authority, HM Treasury and key industry partners.

Pension schemes will be rated from red for poor value to green for those delivering the strongest overall value. The ratings will be based on three key areas: investment returns, costs and charges, and quality of service.

The Government hopes the changes will tackle a wide gap in performance between pension schemes that can leave savers significantly worse off.

Data from CAPAdata for the first quarter of 2026 shows annualised five-year returns for younger savers currently range from around 5 per cent to 13 per cent across large pension schemes.

For someone with a £10,000 pension pot and no further contributions, that difference would leave them with more than £5,000 less after just five years, assuming annual charges of 0.5 per cent.

Pensions Minister Torsten Bell said: "Our task is to level up the quality of the pensions private sector workers receive, towards those in the public sector.

"For the first time, we're making sure savers can see whether they are getting a good deal from the pension they're saving into.

"This is part of the biggest pension reforms for a generation, which are now entering the delivery phase that we are publishing the timeline for today."

Mr Bell said people should be confident their retirement savings are working as hard as they are.

"We can't have people working hard to earn the money they save towards retirement, only to have those funds sitting in schemes that aren't working just as hard on their behalf," he said.

Highlighting the importance of the reforms, Mr Bell added: "The stakes are high, when the gap between the best and worst performers could cost a saver with a £10,000 pot over £5,000 across just five years."

He described the package as delivering on the Government's Plan for Change.

Schemes that fail to improve will come under increasing pressure to raise their standards or close altogether.

Where they fail to act, regulators will have the power to issue compliance notices, impose fines or, in serious cases, wind up the scheme.

From 2028, larger schemes, including Master Trusts, large single-employer schemes and multi-employer contract-based schemes that are open to new employers, will have to complete and publish Value for Money assessments.

The framework will then be extended to all workplace pension schemes from 2029.

Another key change will see pension pots worth £1,000 or less automatically consolidated into a single scheme certified as providing good value.

The Government said this will make it easier for workers who have built up several small pension pots after changing jobs, helping them keep track of their retirement savings while reducing the impact of multiple charges.

The reforms will also introduce default retirement income options, allowing people approaching retirement to convert their pension savings into a dependable income without having to navigate complex financial decisions on their own.

People will still be free to choose a different option if they prefer.

From April 2030, automatic-enrolment schemes within scope must manage at least £25billion in assets or have at least £10billion alongside a credible growth plan to reach £25billion by 2035.

The Government believes these larger "megafunds" will deliver better returns for savers through lower fees, stronger investment performance and greater diversification.