The Department for Work and Pensions has published its consultation on value for money regulations, making several changes since it last consulted, including delaying any consequences for poor value until 2029. Responses can be sent until 1 September. A new discussion paper on scale in defined contribution defaults is open to feedback until 7 September. 

Both the consultation to implement the new VfM framework and the scale discussion paper were published on Monday, along with an updated roadmap. The DWP also put out two research publications, on decumulation and decision-making, and on adequacy in retirement. 

In a new comparison – with potentially wide-ranging implications – pensions minister Torsten Bell said the government must bring private sector pensions up to the same standard as those in the public sector. 

“Our task is to level up the quality of the pensions private sector workers receive, towards those in the public sector,” he said. 

“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 added.  

Bell claimed the pensions reforms flowing from the Pension Schemes Act 2026 “represent a wide consensus across the pensions industry, who have helped shape plans that also tackle the proliferation of small pension pots, drive the move to bigger and better pensions schemes, and simply the process for savers of turning their hard earned savings into a decent retirement income”. 

Better value and good outcomes at retirement built on transparency are at the heart of pensions reform, said the Pensions Regulator’s executive director, strategy, policy and analysis, Richard Knox. 

“The value for money framework, developed in close collaboration between government, regulators and the industry, is a major milestone. Under it, schemes will for the first time be able to reliably compare their performance against the best in the market. The timeline published today provides further clarity as the pensions industry prepares for these vital reforms,” Knox said. 

The value for money proposals have changed considerably since the last paper was published. Among others, the government now suggests a phased implementation, rather than making all in-scope schemes complete the full assessment in the first year. Master trusts, single employer trusts with 50,000 or more members and all firm-designed, open multi-employer contract-based schemes will complete full assessments and assign ratings in 2028.  

Smaller single employer trusts, legacy and bespoke arrangements will only submit data to regulators; their data will not be made public. From 2029 onwards, all in-scope schemes will be required to complete full disclosure, assessment, ratings and also face consequences if they fall short – this will not be the case in 2028. 

The comparator group is more tailored at the zero years to retirement point under the new proposals, depending on the retirement objective of a default arrangement, so that defaults are only compared with others that have the same decumulation target. 

The DWP also proposes that investment performance will now not need to be measured with an arithmetic approach but instead providers must use a geometric averaging methodology based on representative members’ actual experience as they move towards retirement. This also means the five years to retirement data point becomes redundant.  

“The new approach aims to better align with industry practice and reduce reporting burden,” the department said.  

For any forward-looking metrics – which some in the industry had wanted to ensure they would not be penalised for investing in illiquid private markets – the DWP now says that no third-party advice is needed, replacing this requirement with mandatory disclosure of underlying assumptions, “enabling scrutiny and reducing additional cost for possibly limited benefit”.  

The DWP plans to respond and issue final regulations by January 2027. It noted that the Pensions Regulator “will also consult, as appropriate, on any necessary Codes of Practice and/or Guidance”, while  the FCA will prepare a Policy Statement and rules due out in the first quarter of next year, to set out the details of implementing the VfM framework for the contract-based market.   

The value for money consultation comes as TPR has also published new data on master trust investments on Monday, which will run annually until the VfM regulations take effect in 2028. 

The analysis of 25 master trusts covers more than £200bn of assets – about three-quarters of the market – owned by 26m members. TPR highlighted the exposure to private markets in those schemes, with 60% having some and 20% investing at least 5% of assets – exposing half of the membership to those markets. 

“TPR does not tell schemes how to invest, but we do challenge all schemes to deliver value for money. We want to see well-governed schemes confidently considering a broader range of investments, with potential to improve returns for members,” said Knox. 

“We expect trustees and administrators to review their strategy, governance arrangements and diversification in line with our private market guidance. Where schemes cannot demonstrate value, trustees should consider consolidation in members’ interests.” 

The pensions industry continues to make the case for careful sequencing of the reforms contained in the Pension Schemes Act 2026. Deputy chair of the Society of Pension Professionals’ administration committee, Gareth Stears, said the volume of reforms currently in train means clear planning is more important than ever as reforms compete for operational capacity.   

  

“If the government can maintain a clear sequence of reforms, avoid unnecessary changes of direction and allow sufficient implementation time, the industry will be in a much stronger position to deliver lasting improvements for pension savers,” said Stears.