Pensions in the United Kingdom
Pensions in the United Kingdom are organised around three pillars: a contributory State Pension that provides a baseline income, private pensions delivered through the workplace or on a personal basis, and public service pension schemes established in law. Oversight is split between The Pensions Regulator for trust-based occupational schemes and the Financial Conduct Authority for contract-based pensions and retail conduct, with a published joint regulatory strategy for the sector.
Most employees now enter saving through automatic enrolment, and saving mainly builds up in defined contribution arrangements. In 2024 about 89% of eligible employees in Great Britain were saving into a workplace pension, an estimated 21.7 million people. Patterns of access to defined contribution savings have continued to evolve since the 2015 pension freedoms, with both drawdown and annuity products used.
The State Pension is financed from National Insurance and depends on an individual’s contribution record. The full rate of the New State Pension in 2025 to 2026 is £230.25 a week.
Public service schemes operate under the framework created by the Public Service Pensions Act 2013. Most central government schemes are unfunded and the Local Government Pension Scheme is funded. On the Whole of Government Accounts basis the UK’s net public sector pension liability was £1,415.0 billion at 31 March 2023.
Digital and data initiatives sit alongside these structures. Under the pensions dashboards programme, schemes and providers must connect to a common digital architecture by 31 October 2026 so that individuals can find their pensions information in one place.
Overview
The United Kingdom pension system has three main parts: a contributory State Pension, private pensions provided through the workplace or on a personal basis, and public service pension schemes established by statute. Most employees are brought into saving through automatic enrolment. Private provision includes defined benefit and defined contribution schemes, and there is a developing collective defined contribution model.Regulation is divided between public bodies. The Pensions Regulator oversees the governance and administration of trust-based workplace schemes and public service schemes; the Financial Conduct Authority regulates personal and other contract-based pensions. The Money and Pensions Service provides free pensions guidance to the public through its MoneyHelper service. The Pension Protection Fund acts as the statutory safety net for eligible defined benefit schemes.
Public service pension schemes operate within a statutory framework set by the Public Service Pensions Act 2013. Periodic actuarial valuations for those schemes are carried out under HM Treasury Directions and published by the Government Actuary’s Department and responsible departments.
A statutory pensions dashboards programme aims to connect schemes and providers to a common digital architecture by 31 October 2026, with staged connection guidance issued by the Department for Work and Pensions.
History
Until the 20th century, poverty was seen as a quasi-criminal state, and this was reflected in the Vagabonds and Beggars Act 1494 that imprisoned beggars. In Elizabethan times, English Poor Laws represented a shift whereby the poor were seen merely as morally degenerate, and were expected to perform forced labour in workhouses.The beginning of the modern state pension was the Old Age Pensions Act 1908, which provided 5 shillings a week for those over age 70 whose annual means did not exceed £31 10s.. It coincided with the Royal Commission on the Poor Laws and Relief of Distress 1905–1909 and was the first step in the Liberal welfare reforms towards the completion of a system of social security, with unemployment and health insurance through the National Insurance Act 1911.
In the early 20th century, occupational pension schemes started to become more common, with one driver being the Finance Act 1921 which provided tax-relief on pension scheme contributions.
After the Second World War, the National Insurance Act 1946 completed universal coverage of social security. The National Assistance Act 1948 formally abolished the poor law, and gave a minimum income to those not paying National Insurance. The Basic State Pension was also introduced in 1948. Occupational pension schemes also flourished after the Second World War, with pensions becoming a key tool to attract and retain staff.
In the second half of the 20th century, there was a succession of legislative changes to protect pension scheme members, prevent abuse of the generous tax-reliefs available and prevent fraudulent activity. Some of these changes were precipitated by Robert Maxwell's plundering of the Mirror Pension Funds. This led to the Goode Report, whose recommendations were implemented by comprehensive statutes in the Pension Schemes Act 1993 and the Pensions Act 1995.
The early 1990s established the existing framework for state pensions in the Social Security Contributions and Benefits Act 1992 and Superannuation and other Funds Act 1992.
In 2002 the Pensions Commission was established as a cross-party body to review pensions in the United Kingdom. The first Act to follow was the Pensions Act 2004, which updated regulation by replacing the Occupational Pensions Regulatory Authority with the Pensions Regulator and relaxing the stringency of minimum funding requirements for pensions, while ensuring protection for insolvent businesses. In a major update of the state pension, the Pensions Act 2007 aligned and raised retirement ages. Since then, the Pensions Act 2008 has set up automatic enrolment for occupational pensions, and a public competitor designed to be a low-cost and efficient fund manager, called the National Employment Savings Trust.
Partially as a result of the new regulation, since the turn of the century there has been significant decline in the provision of defined benefit pensions in the private sector, with money purchase arrangements increasingly being used for new benefit accrual.
In November 2023, The Trussell Trust calculated that a single adult in the UK in 2023 needs at least £29,500 a year to have an acceptable standard of living, up from £25,000 in 2022.
On 14 November 2024, Rachel Reeves announced plans to merge pension funds into megafunds to unlock up to £80 billion for investment and boost the UK's economic growth. The reform, set to manage £500 billion by 2030, drew inspiration from similar initiatives in Australia and Canada. While business leaders welcomed the proposal, they expressed concerns about the government's recent budget and its impact on confidence in the UK economy, which has struggled since the 2008 financial crisis.
Pensions Act 2011
The Act amended the timetable for increasing the state pension age to 66. Under the Pensions Act 2007, the increase to 66 was due to take effect between 2024 and 2026. This Act brought forward the increase, so that state pension age for both men and women began rising from 65 in December 2018 and reached 66 in October 2020. As a result of bringing forward the increase to 66, the timetable contained in the Pension Act 1995 for equalising women's and men's state pension ages at 65 by April 2020 was accelerated, so that the women's state pension age reached 65 in November 2018.The Act introduced amendments to primary legislation to amend the regulatory framework for the duty on employers to automatically enrol eligible workers into a qualifying pension scheme and to contribute to the scheme. These measures implemented recommendations from the Making Automatic Enrolment Work review and revised some of the automatic enrolment provisions in the Pensions Act 2008.
The Act amended existing legislation that provided for revaluation or indexation of occupational pensions and payments by the Pension Protection Fund.
The Act defined "money purchase benefits" for the purpose of pensions law. This was a consequence of the judgment of the Supreme Court in Houldsworth v Bridge Trustees and Secretary of State for Work and Pensions. The Act took powers to make transitional, consequential or supplementary provision as well and to make further amendments to the definition of "money purchase benefits".
The Act introduced provisions into the current judicial pension schemes to allow contributions to be taken towards the cost of providing personal pension benefits to members of those schemes.
The Act also contained a number of measures to correct particular references in the existing body of pensions-related legislation and other small and technical measures to both state and private pension legislation. This included the following measures:
- increased flexibility in the date of consolidation of additional state pension;
- abolition of new awards of Payable Uprated Contracted-out Deduction Increments ;
- Financial Assistance Scheme: amendments to legislation concerning transfer of assets, and amount of payments;
- miscellaneous amendments to Pension Protection Fund legislation;
- amendments to legislation concerning payments of surplus to employers;
- amendments to legislation concerning the requirement for indexation of cash balance benefits; and
- corrective amendments to legislation concerning the calculation of debt owing to a pension scheme.
State pensions