Chancellor Rachel Reeves has suffered a significant setback after a key financial watchdog branded her flagship pension reforms "disappointing".
What is the Value for Money mandate?
The Financial Conduct Authority (FCA) delivered its critical verdict as part of a consultation into the government's proposed Value for Money framework for pension schemes. Chancellor Rachel Reeves first announced the intention to mandate this framework back in 2024 as part of a wider review of the pensions system.
The legislative powers required to enforce the new framework were included in the Pension Schemes Bill, which was formally introduced in Parliament on 5 June 2025. The proposed system includes a new, fourth category for top performers – a dark green rating reserved for the very strongest pension schemes.
Industry support with significant caveats
While the overhaul has received some industry backing, the FCA's consultation highlights major shortcomings. Helen Morrissey, head of Retirement Analysis at investment platform Hargreaves Lansdown, supports the reforms in principle but outlined clear disappointments.
"The reforms outlined in this paper will give members a better understanding of whether they are getting true value for money from their scheme and put them on course for a better retirement outcome," Morrissey said. "It's a clear system by which members can hold providers to account."
Key engagement metrics delayed
The core criticism centres on what the framework currently omits. "However, costs and charges are only one element of determining value," Morrissey continued, "and we are disappointed to see that the inclusion of wider engagement metrics beyond completion of expression of wish forms has been pushed out to the medium term alongside completion of member satisfaction surveys."
These delayed metrics are considered vital for assessing how actively employees interact with their pension. They include crucial behaviours such as:
- Making additional contributions beyond the minimum.
- Choosing investments outside the default fund.
- The frequency of logging into pension accounts to review savings.
"These wider metrics are hugely important in measuring engagement beyond basic hygiene factors," Morrissey argued. "Through measuring these factors, we can work with employers to boost engagement where it is needed." The delay in implementing these measures is seen as a missed opportunity to fully gauge and improve pension scheme member involvement.
The FCA's critical feedback represents a notable blow for the Chancellor, casting doubt on whether the initial proposals go far enough to ensure genuine value and engagement for millions of UK pension savers.
