The Department for Work and Pensions (DWP) has confirmed a major pension change set to take effect from October, following revelations that savers with a £10,000 pot could be over £5,000 worse off across five years due to underperforming schemes.
New Value for Money Framework
The DWP, in collaboration with the Pensions Regulator (TPR), the Financial Conduct Authority (FCA), and HM Treasury (HMT), has launched the new Value for Money framework. This initiative aims to boost retirement pots and provide industry clarity on the delivery timetable for landmark reforms.
The framework is designed to “drive up standards and ensure savers get the best possible returns.” It will allow pension savers to compare how their scheme’s returns stack up against others.
Timeline and Implementation
A draft regulations consultation will be published in October 2026, with the pathway closing in 2035. From 2028, larger schemes—including Master Trusts, large single employer schemes, and multi-employer contract-based schemes open to new employers—must complete and publish Value for Money assessments. The changes will extend to all workplace pension schemes from 2029.
Under the new system, schemes will be assessed on investment performance, costs and charges, and quality of service. They will be rated from red (poor value) to green (outperforming). The poorest performing schemes will be forced to improve or close. Regulators can issue compliance notices, levy fines, or in serious cases wind up schemes that fail to act.
Ministerial Statement
Torsten Bell, Minister for Pensions, said: “Our task is to level up the quality of the pensions private sector workers receive, towards those in the public sector. For the first time, we’re making sure savers can see whether they are getting a good deal from the pension they’re saving into.
“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. The stakes are high, when the gap between the best and worst performers could cost a saver with a £10,000 pot over £5,000 across just five years.”
Bell added that this is part of the biggest pension reforms for a generation, now entering the delivery phase. The reforms also tackle the proliferation of small pension pots, drive the move to bigger and better schemes, and simplify the process for savers to turn savings into a decent retirement income.
