The Department for Work and Pensions (DWP) has unveiled a timetable for what it calls the biggest package of pension reforms in a generation, enabling millions of workers to compare how their workplace pension performs against others. For the first time, workplace pension schemes will be required to measure and publish their performance using a new Value for Money framework.
New Value for Money Framework
The assessments will evaluate investment performance, costs and charges, and the quality of customer service. This will allow savers to see whether their pension is among the best-performing schemes or those offering poorer value. The DWP said the reforms aim to tackle a performance gap that can leave someone with a £10,000 pension pot more than £5,000 worse off over five years, depending on their scheme.
Pensions Minister Torsten Bell stated: "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."
Regulatory Powers and Timeline
Under the new system, schemes delivering poor value will be expected to improve or leave the market. Regulators will have powers to issue compliance notices, impose fines, or, in the most serious cases, wind up the scheme. The first Value for Money assessments will be published by larger workplace pension schemes, including Master Trusts and large employer schemes, from 2028. The requirements will then extend to all workplace pension schemes from 2029.
Default Retirement Income Options
Alongside the new ratings, the Government has confirmed plans to introduce default retirement income options. These are designed to help people turn their pension savings into a regular retirement income without navigating complex financial decisions alone, while still allowing savers to choose alternative options if they wish.
The DWP estimates the average pension saver could see their retirement pot increase by around £29,000 over their working life as a result of the reforms. Sarah Pritchard, deputy chief executive of the Financial Conduct Authority (FCA), said: "This framework puts savers first. For the first time, it creates a consistent way to compare value across workplace pensions, bringing transparency to the outcomes that really matter. Together with the Department for Work and Pensions and The Pensions Regulator, we're building a pensions market that is more transparent, more accountable, and works better for everyone."
Consolidation of Pension Schemes
The UK Government is also consulting on plans to create fewer, larger pension schemes. From April 2030, workplace pension schemes covered by the reforms will generally be expected to manage at least £25 billion in assets, or have at least £10 billion alongside a credible plan to reach the higher threshold by 2035. The Government believes larger pension schemes will be able to deliver better long-term investment returns, lower costs, and improved value for millions of savers.
