DC: A new "value for money" framework
As indicated in the King's Speech in July 2024, the Pension Schemes Act includes provisions to establish a new "value for money" (VfM) framework for trust-based DC schemes and sections. Regulations will be made and there will be statutory guidance for trustees and new powers for the Pensions Regulator.
- Why this is important
Trustees will be required to conduct VfM assessments, looking at a number of metrics. Trustees will also need to decide whether their scheme or section is 'fully delivering', has an 'intermediate' rating, or is 'not delivering' VfM. If the scheme or section is not 'fully delivering' they will need to take steps to improve value, or to consolidate with – that is transfer members and their benefits to – a scheme which will provide value.
The aim is to create a framework in which trustees consider the overall value provided by a DC pension scheme or section (metrics such as the quality of services provided to members, investments and investment performance, costs and charges), and have access to information which will allow them to compare their scheme to others.
In the workplace pensions roadmap published in June 2025 the government said that this and the new guided retirement duty "offer clarity to trustees, employers and providers on their duties in the run up to 2030. This may help crystallise decision-making for some as they see the increasing bar of what it means to be an automatic enrolment scheme going forward – an at-scale, good value, retirement income provider for typical savers".
- Current position and projected timings
The value for money provisions, which consist largely of powers to make regulations, are in sections 11 to 21 of the Pension Schemes Act 2026.
The Act received Royal Assent on 29 April 2026, but sections 11 to 21 will only take effect when brought into force by regulations.
In the July 2026 update to its workplace pensions roadmap, the government gave the following estimated timings:
- Additional Pensions Regulator guidance published between July and September 2026.
- Regulations for trust-based schemes come into force and Financial Conduct Authority policy statement and rules for contract-based schemes published in the first quarter of 2027.
- Pensions Regulator to open a consultation on a code of practice in the first quarter of 2027.
- Pensions Regulator's code of practice to come into force and schemes to submit first data to regulators in March 2028
- First value for money assessment reports and data to be published in October 2028
- Second year value for money data to be submitted between January and March 2029.
- Second year value for money assessment reports and data to be published in October(?) 2029.
- VfM data will then continue to be published and VfM assessments completed on an annual basis.
In terms of the current position with VfM rules and the likely content of regulations, there have been a number of developments in 2026.
On 8 January 2026 the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) published a document combining the FCA’s response to its previous consultation, a new consultation on draft detailed (FCA handbook) rules and guidance for contract-based schemes, and a call for feedback to help the DWP when it develops VfM regulations for trust-based schemes. The document described the following:
- The schemes, default arrangements and "quasi-default" arrangements likely to need to comply with the new VfM framework. For trust-based schemes, scope was one of the points on which feedback is sought. There was also a proposal that "trustees who have decided to wind up the entire scheme would be exempt from the need to produce a VFM assessment if they have notified TPR under section 62(4) or (5) of the Pensions Act 2004 that the winding up of the scheme in question has commenced. Where a decision is made to transfer members out of a default arrangement but not to wind up the scheme, trustees will be exempt from the need to produce a VFM assessment where TPR has been provided with evidence that an agreement has been made (in principle) with an alternative provider to accept the transfer of those members to a new arrangement."
- The backward-looking investment performance metrics schemes might have to disclose, and the forward-looking metrics it was proposed should be disclosed.
- The asset allocation disclosures schemes might have to make. To help to refine these requirements, the FCA would carry out a voluntary data collection exercise for some contract-based providers, and TPR will seek to draw comparisons from data collected as part of a regulatory exercise of its own.
- Updated proposals for quality of service and costs & charges data to be disclosed.
- Changes to the proposed process for VfM assessments, including a change from 4-step process leading to one of 3 ratings (red, amber or green) to a 3-step process leading to one of 4 ratings (red, amber, light green, or dark green).
- Changes to the actions for arrangements identified as providing poor VfM.
- A proposal that all VfM data be entered into a central VFM database "for calculation of data for comparison and potentially publication", with firms providing a link to the database on their websites instead of publishing VfM data on them.
- Proposals for VfM assessment reports. "For trust-based arrangements, TPR intends for the VfM assessment report to be a standalone document, not part of the Chair’s statement. The DWP are also considering amendments to the existing legislation for Chair’s statements to ensure that there is no duplication or overlap with the VFM framework requirements."
The consultation was open until 8 March 2026 and TPR published a guide to it to help trustees to understand the proposals and (because the VfM framework will apply to both contract and trust-based schemes) respond if they would like to do so.
On 13 July 2026, the DWP and the FCA opened a consultation on a "final set of proposals ahead of implementation", including on draft regulations for trust-based schemes and draft final rules for contract-based schemes.
The consultation paper summarises the feedback received in the previous consultation and sets out the approach suggested now. This includes phased implementation. In year one (2028), master trusts, large single-employer trusts (SETs) and open multi-employer contract-based schemes will complete full value for money assessments, but smaller SETs, legacy and bespoke arrangements will only have to submit data to regulators. In addition, " no formal consequences will apply in 2028 in direct relation to the [value for money] Framework, with consequences (including closure measures) only taking effect from the second assessment cycle onwards."
The July 2026 consultation also includes a proposal that, "where trustees have taken a decision to wind up the entire scheme, they should be exempt from the requirement to produce [value for money] data and undertake a [value for money] assessment. This exemption would apply from the point at which trustees notify TPR, in accordance with section 62(5)(b) of the Pensions Act 2004, that the winding up of the scheme has commenced." And, "where trustees decide to transfer members out of a default arrangement (for example, a disinvestment to that arrangement), but do not intend to wind up the scheme, they should be exempt from the requirement to produce both [value for money] data and a [value for money] assessment from the point at which TPR has been provided with evidence that an agreement in principle has been reached with an alternative provider to accept the transfer of those members to a new arrangement."
The consultation was originally open until 1 September 2026, but the deadline for responding was extended to 15 September 2026. It provides trust and contract-based schemes with an opportunity to comment on detailed draft regulations and rules, and help shape the final versions to take effect next year.
To help trustees, on 11 August 2026, the Pensions Regulator published an overview of these latest proposals for the value for money framework and information on how trustees can start preparing to comply, together with an overview of the proposed value for money database and how it will help trustees and independent governance committees to meet their obligations. It said that more information on how schemes can start to prepare for the value for money requirements will follow after the DWP and FCA's consultation has closed.
The Pensions Regulator has asked the trustees of smaller DC schemes to consider whether they will be able to meet the new requirements (including VfM) to be introduced under the Pension Schemes Act or whether members would be better served by the scheme consolidating with a larger one and being wound up. It has also published new guidance on transferring to a DC master trust, and updated guidance on winding up.
DC: New guided retirement duty
As indicated in the King's speech in July 2024, the Pension Schemes Act will introduce a guided retirement duty. This will be a new duty for DC trustees and providers to design, make available to members and keep under review one or more default retirement income options ("default pension benefit solutions").
Trustees and providers will also need to prepare and publish a pension benefits strategy. This will be their strategy for ensuring that they "identify and carry out the steps they need to take for the purpose of understanding the requirements of eligible members of the scheme with regard to default pension benefit solutions", and design or arrange default pension benefit solutions that take account of those needs. The Pensions Regulator might be asked to publish guidance on preparing a pensions benefits strategy.
- Why this is important
The aim of this change is to make it easier for DC members to navigate retirement choices. Trustees are likely to need to offer, or to team up with a provider to offer, at least one default retirement income option for members. Members will be able to opt-out of the default.
In the workplace pensions roadmap published in June 2025 the government said that this and the new value for money requirement "offer clarity to trustees, employers and providers on their duties in the run up to 2030. This may help crystallise decision-making for some as they see the increasing bar of what it means to be an automatic enrolment scheme going forward – an at-scale, good value, retirement income provider for typical savers".
- Current position and projected timings
The guided retirement provisions, which consist largely of powers to make regulations, are in sections 50 to 58 of the Pension Schemes Act 2026.
The Act received Royal Assent on 29 April 2026, but sections 50 to 58 will only take effect when brought into force by regulations.
In the July 2026 update to its workplace pensions roadmap, the government gave the following estimated timings:
- Guided retirement delivery group starts work in summer 2026.
- DWP policy consultation and Financial Conduct Authority (FCA) discussion paper to be published between October and December 2026.
- DWP to consult on draft regulations for trust-based schemes and FCA to consult on draft rules for contract-based schemes between July and September 2027.
- Subject to progress on the regulations, TPR to open a consultation on draft guidance between April and June 2028.
- Regulations to be made and FCA policy statement published between July and September 2028.
- To support clear and consistent communication of likely retirement income from default options, Financial Reporting Council to publish standards for illustrations for common forms of decumulation (retirement) options and illustrations during the decumulation stage between July and September 2028.
- DC master trusts and FCA-regulated schemes to be compliant with the guided retirement duty from late summer 2029 (from some point between July and September 2029)
- Single-employer trusts and schemes committed to pursuing a retirement-only collective defined contribution default pension to be compliant with the guided retirement duty from late summer 2030 (some point between July and September 2030.
The original suggestion was that the guided retirement duty might apply to DC master trusts from 2027 and to other trust-based pension schemes and group personal pension plans from 2028. The timings have been adjusted to allow time for the introduction of retirement-only collective defined contribution schemes, the first of which might be authorised by June 2029.
You can find more information about the introduction of retirement (only) collective defined contribution options, in the "CDC: Making CDC more widely available" entry.
On 13 July 2026, the DWP published a policy paper setting out its guiding principles for default pensions and the outcomes they are intended to deliver for members.
On 5 March 2026, the Pensions Regulator published analysis of the decumulation options currently offered by occupational DC schemes.
In a related press release, the Pensions Regulator said that "too many members in smaller schemes are left without support when they reach retirement. This is not good enough.
"We urge trustees to start getting ready for the Pensions Schemes Bill by reviewing their offer and starting to design their decumulation products.
"If you are not able to guide savers into the right retirement options for them, our message is clear: you should consider consolidation into a scheme that can offer value for money solutions."
On 31 March 2026 the Pensions Regulator asked the trustees of smaller DC schemes to consider whether they will be able to meet the new requirements (including guided retirement) to be introduced under the Pension Schemes Act or whether members would be better served by the scheme consolidating with a larger one and being wound up.
To help trustees, it published new guidance on transferring to a DC master trust, and updated guidance on winding up.
DC: Consolidation of small pots
As indicated in the King's speech in July 2024, the Pension Schemes Act will introduce the primary legislation needed to support the consolidation of small deferred pots in DC schemes used for automatic enrolment.
- Why this is important
This will provide a framework for the orderly transfer of DC pots worth £1,000 or less which have not received any contributions for a specified period (to be at least 12 months) into approved "consolidator" schemes.
Trustees will need to give a member at least 30 days' notice of the transfer and a member will be able to opt out (choose for their pot to stay where it is).
Consolidation should reduce costs and so improve value for members. It should also make it easier for members to keep track of their pension savings.
- Current position and projected timings
The small pot provisions are in sections 22 to 39 of the Pension Schemes Act 2026. They took effect on 29 April 2026, the day the Act received Royal Assent, but consist largely of powers to make regulations.
In the July 2026 update to its workplace pensions roadmap, the government gives an updated, indicative, timeline for small pots consolidation but confirms that timings are subject to change. The government will publish "a more definitive timetable when [it consults] on next steps in the autumn. This first phase of consultation will focus on exploring the framework for establishing default consolidator schemes, alongside further consideration of the…infrastructure required to support pension pot consolidation….The…responsibilities of ceding schemes will be considered in a subsequent phase of consultation".
The indicative timetable is:
- Policy consultation "Building the foundations for consolidation" published between July and September 2026.
- Consultation response and consultation on draft regulations published between April and June 2027.
- The Pensions Regulator opens a consultation on a draft code and the Financial Conduct Authority a consultation on rules between April and June 2027.
- Second policy consultation published between October and December 2027.
- Consultation response and consultation on further draft regulations published between January and March 2028. The earlier set of regulations laid before Parliament and an FCA policy statement published at about the same time.
- Consultation response in the second consultation and further draft regulations published between April and June 2028.
- The second set of regulations laid before Parliament at some point between January and March 2029.
- Small pots transfer duties will come into force at some point between April and June 2030 (so after the value for money framework has started to apply to all schemes, to avoid schemes being required to move small pots earlier than other pots if they are on track to consolidate or merge with another scheme).
On 31 March 2026 the Pensions Regulator asked the trustees of smaller DC schemes to consider whether they will be able to meet the new requirements (including the transfer of small pots) to be introduced under the Pension Schemes Act or whether members would be better served by the scheme consolidating with a larger one and being wound up.
To help trustees, it published new guidance on transferring to a DC master trust, and updated guidance on winding up.
DC: Main scale default arrangements
In line with the government's May 2025 response to its consultation on unlocking the UK defined contribution (DC) pensions market for growth, sections 40 to 48 of the Pension Schemes Act 2026 will introduce a requirement for the trustees and providers of DC master trusts and group personal pension schemes used for automatic enrolment to have at least one regulator-approved "main scale default arrangement" with at least £25 billion in assets under management (AUM).
DC master trusts and group personal pension schemes used for automatic enrolment will need to obtain regulatory approval in respect of a main scale default arrangement unless an exemption applies or there is eligibility for what will be known as "transition pathway relief" or "new entrant pathway relief".
If the relevant provision in the Pension Schemes Act 2026 (the well-publicised reserve power to mandate investment) is brought into force and regulations are made, DC master trusts and group personal pension schemes used for automatic enrolment will also need regulatory approval that they meet asset allocation requirements. The asset allocation requirements would be that at least X percent (by value) of the assets held in main default funds of the scheme are "qualifying assets". The percentage might be of all of the assets held in main defaults, or just certain types of asset held in main defaults. The qualifying assets would be set out in regulations and might be direct or indirect holdings in UK or other private equity, venture capital, private credit, interests in land, infrastructure, or unlisted equity securities. You can read more about the reserve power below.
In broad terms the "transition pathway relief" mentioned above will allow a provider who will have at least £10 billion in AUM in a main default arrangement by 2030, and has a credible plan to grow that default to at least £25 billion within a set timescale (by 2035), to apply to regulators to be placed on a "transition pathway". The detail will be set out in regulations.
"New entrant pathway relief" will provide a pathway for new entrants to reach scale. Conditions for a successful application for relief are likely to include that the scheme does not yet have any members, has strong potential to grow to meet the scale requirement and has an innovative product design. The detail will be set out in regulations.
Regulations may also place restrictions on introducing new, 'non-scale' default arrangements.
- Why this is important
This is a major change for DC master trusts and group personal pension schemes (GPPs) used for automatic enrolment.
Any trustees and employers involved in a project that involves transferring members to a DC master trust or other arrangement, or otherwise selecting a DC master trust or GPP to provide benefits going forwards, might also like to discuss this change with their advisers. When selecting a provider, they might like to note the Pensions Regulator's guidance on selection mentioned in the 'current position and projected timings' section below.
- Current position and projected timings
The Pension Schemes Act 2026 received Royal Assent on 29 April 2026. However, sections 41 to 48 and most of section 40 of the Act will only take effect when brought into force by regulations. In the July 2026 update to its workplace pensions roadmap, the government gave the following estimated timings:
- Report on the effects of consolidation on innovative product design in pension schemes to be published between April and June 2027.
- Consultation on regulations to be published between October and December 2027.
- The Pensions Regulator to consult on a Code and the Financial Conduct Authority to consult on guidance during 2028.
- Regulations to be made between October and December 2028.
- Fragmentation review to start between January and March 2029. (The government has previously said that this review will explore the reasons why any default arrangements remain outside of main scale default arrangements. Non-main defaults "should have significantly reduced, and they should only exist where there is a strong reason for them to do so". – The review is provided for by section 43 of the Act, with section 44 giving a follow-on power to make regulations about the consolidation of non-scale default arrangements into approved main scale default arrangements. The Act also contains a power to make regulations to restrict the introduction of new default arrangements.)
- Applications for the transition pathway to be made from 2029.
- Applications to relevant regulator for scale approval to be made from 2029.
- Requirements for new default arrangements to be approved in 2029.
- Fragmentation review report published between January and March 2030.
- Scale thresholds to apply and transition pathways to start from April 2030.
- Transition pathways to end (£25 billion threshold to be reached) by the end of 2035.
The updated roadmap also says that to "ensure continuity of saving for members, those schemes that are not approved at scale or for transition pathway relief will enter a protected period during which they can continue to manage their existing business. This ensures that ongoing contributions can continue from existing employers whilst schemes work with regulators and employers to move all future contributions to a different scheme."
Other recent developments
On 13 July 2026, the DWP published a discussion paper seeking feedback on key elements of MSDA policy. The call for feedback is open until 7 September 2026. The responses to it will help to shape the detailed regulations to be made under the Act.
On 9 March 2026:
- The DWP published a document summarising key policy points relating to main scale default arrangements. A lot of the information in this document was already known, but it did set out considerations for schemes considering the transition pathway.
- The Pensions Regulator published a statement intended to be read with the DWP paper. This set out how the trustees of smaller DC master trusts considering the transition pathway should "assess their scheme’s growth potential and prepare". The statement also contained an important message for employers and employee benefit consultants involved in DC selection decisions. This was that "[w]hile not every master trust will achieve scale of £25 billion by 2030 or 2035, employers and their advisers should not assume that all master trusts not yet at scale will be unable to meet the criteria" – "it is quite possible for a smaller master trust to reach scale over the next 10 years". It went on to set out the factors employers and their advisers should consider when selecting a DC provider.
- The reserve power to mandate investment
On 19 and 23 March 2026 (at Report stage), the House of Lords made a number of changes to what are now sections 40 to 48 of the Act. A key focus of these was removing the reserve power to mandate investment.
The reserve power to mandate investment then became a main focus of 'ping pong', the movement of the (then) Bill backwards and forwards between the House of Commons and House of Lords until the final content was agreed.
The end result is that:
- The reserve power will only apply if the relevant provision in the Act is brought into force and regulations are made to introduce the detailed requirements.
- If the relevant provision in the Act (part of section 40) is not brought into force before the end of 2032 then it will sunset (fall away). If it is brought into force before the end of 2032, then only one set of asset allocation regulations can be made and (even if the relevant part of section 40 is brought into force before then) the regulations cannot be made before 1 January 2028. More generally, the asset allocation provisions in the Act are repealed at the end of 2035.
- The regulations could not have the effect of requiring (a) more than 10% by value of all of the assets of the scheme that are held in main default funds to be qualifying assets, or (b) more than 5% (by value) of all of the assets so held to be of a UK-specific description (a description framed by reference to whether an asset is located in the UK or meets any other condition linked to economic activity in the UK).
- Before regulations could be made "the Secretary of State [would have to] prepare and publish a report setting out (a) a joint assessment by the Financial Conduct Authority and the Pensions Regulator of the extent to which there is evidence of competitive conditions restricting relevant master trusts and group personal pension schemes from investing in qualifying assets, including in circumstances where such investments may be in the best interests of members of such schemes; (b) the Secretary of State’s assessment of the extent to which relevant master trusts and group personal pension schemes have made progress towards achieving (i)10% (by value) of scheme assets held in main default funds to be qualifying assets, and (ii) 5% (by value) of scheme assets so held to be of a UK-specific description; (c) the Secretary of State’s assessment of any barriers to relevant master trusts or group personal pension schemes investing in qualifying assets, including in particular where such assets are located in the United Kingdom; (d) the steps taken by the Secretary of State or the Authority to address any such barriers; (e) how the financial interests of members of relevant master trusts and group personal pension schemes are or would be affected by the proposed regulations; (f) what effects the proposed measures could be expected to have on economic growth in the United Kingdom; and (g) any other matters the Secretary of State considers appropriate."
- Before making regulations, the Secretary of State would have to have regard to that joint assessment and consult the Treasury.
- Regulations would also have to be made to provide a mechanism for schemes to apply for a regulatory exemption from the requirement to meet the asset allocation requirement on the grounds that meeting it is likely not to be in the best interests of members of the scheme.
- Within five years of the asset allocation regulations coming into force the Secretary of State would have to conduct a review of their impact considering, among other things, whether and how the financial interests of members of master trust schemes and group personal pension schemes have been affected by the regulations and "the effects (if any) of the measures on economic growth in the United Kingdom".
DC: Contractual override
In line with the government's May 2025 response to its consultation on unlocking the UK defined contribution (DC) pensions market for growth, the Pension Schemes Act will introduce a contractual override. Stringent member protections will apply, including a "best interests" test and a right for members to opt-out.
- Why this is important
The government has said that, in the run up to 2030, it expects the providers of contract-based schemes to proactively consider consolidating any default arrangements into their intended main scale default arrangement(s). The contractual override will give providers (for example, the providers of group personal pensions) the power to transfer members into a main scale default arrangement without their consent. Providers will also be able to use the override where, for example, the new value for money framework means that they need to make improvements to an arrangement or move savers to an arrangement that provides better value.
- Current position and projected timings
The contractual override is in section 49 of the Pension Schemes Act 2026.
The Act received Royal Assent on 29 April 2026, but section 49 will only take effect when brought into force by regulations.
In the July 2026 update to its workplace pensions roadmap, the government says that it hopes the contractual override will be enabled in March 2028. It also says that Treasury regulations might be laid between October and December 2026, and that the Financial Conduct Authority might launch a consultation on draft rules between January and March 2027 and publish a policy statement between July and September 2027.
DC: Review of communication and financial promotion rules
On 23 March 2026, at House of Lords Report stage, a new provision was added which would have required the government to "conduct a review of all legislation, regulation and guidance governing marketing, financial promotion and member communications in relation to occupational and personal pension schemes."
The review would have had to "consider whether existing rules unduly restrict pension providers from: communicating risks, warnings, and comparative information to scheme members; providing guidance and targeted support on decumulation options, fund choice, consolidation, and value for money; or supporting informed member decision-making and actions without constituting regulated financial advice, through either guidance or targeted support."
However, the House of Commons disagreed with this provision and it does not appear in the Pension Schemes Act 2026.
