In this paper, the steady incompressible Navier–Stokes equations are discretized by the finite element method. The resulting systems of equations are solved by preconditioned Krylov subspace methods. Some new preconditioning strategies, both algebraic and problem dependent are discussed. We emphasize on the approximation of the Schur complement as used in semi implicit method for pressure‐linked equations‐type preconditioners. In the usual formulation, the Schur complement matrix and updates use scaling with the diagonal of the convection–diffusion matrix. We propose a variant of the SIMPLER preconditioner. Instead of using the diagonal of the convection–diffusion matrix, we scale the Schur complement and updates with the diagonal of the velocity mass matrix. This variant is called modified SIMPLER (MSIMPLER). With the new approximation, we observe a drastic improvement in convergence for large problems. MSIMPLER shows better convergence than the well‐known least‐squares commutator preconditioner which is also based on the diagonal of the velocity mass matrix. Copyright © 2008 John Wiley & Sons, Ltd.