The Pensions Bill, published last month, aims to make it easier for people to save for retirement and make company pension schemes easier to manage.
A second set of regulations aims to simplify the tax treatment of pensions by taxing them all in the same way.
Industry watchers said the pensions overhaul would require life and pension companies to make sweeping changes to their IT systems, including rewriting policy administration systems to reflect new rules, converting and testing data and, in some cases, buying new software and hardware.
Jason Whyte, senior manager in the insurance practice at management consultancy Accenture, estimated that the five largest life and pension providers would have to pay between £15m and £30m each in IT costs to comply with the legislation, although costs would vary.
"The IT side of things is going to be the major challenge," said Whyte. "Most [life and pension companies] have at least four platforms they support and some have as many as 20. A big insurer may be looking to change 10 of its policy administration systems. It is going to be a challenge if you have systems supported by a relatively small team."
Pension companies agreed that the legislation would have far-reaching implications for their IT systems.
"The work we have done so far on the pensions proposals suggests there will be big IT and business costs," said Margaret Smith, director of business information services at Legal & General. "It is about crawling over all the code in the pension systems."
Norwich Union predicted the changes needed to pension IT systems would be a "multimillion-pound" commitment this year and would also require IT projects to be reprioritised.
Angus Eaton, director of legal services at Norwich Union, said, "Pension simplification will have a considerable impact on Norwich Union's administration systems and IT requirements."
The IT compliance projects will also have to be completed within a tight timeframe. Although the new pension rules are due to come into force in April 2005, details are not expected to be finalised until this autumn, giving firms about six months to rewrite their systems.