DC: A new "value for money" framework
As indicated in the King's Speech in July 2024, the Pension Schemes Bill 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 the government says 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
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 describes 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 is one of the points on which feedback is sought. There is 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 will have to disclose, and the forward-looking metrics it is proposed should be disclosed.
- The asset allocation disclosures schemes will have to make. To help to refine these requirements, the FCA will 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. TPR published a guide to the consultation to help trustees to understand the proposals in it and (because the VfM framework will apply to both contract and trust-based schemes) respond to the consultation if they would like to do so.
The relevant part of the Pension Schemes Bill, which consists largely of powers to make regulations, is expected to come into force on a date to be set by regulations.
The pensions roadmap released alongside the Pension Schemes Bill suggests that the government hopes:
- The Bill will receive Royal Assent in 2026.
- Once the Bill has received Royal Assent the government will follow the regulation-making process for trust-based schemes in 2026-27. (For trust-based schemes, much of the detail of the VfM framework will be in regulations and we expect the DWP to consult on draft regulations before they are finalised and made.)
- First VfM data will need to be published, and first VfM assessments completed, in 2028.
- VfM data will then be published and VfM assessments completed on an annual basis.
Other recent developments
At Report stage in March 2026, the House of Lords made some minor amendments to the value for money provisions in the Bill to correct drafting errors and to say that the value for money provisions in the Bill will come into force on a date to be set by regulations and not (as originally written) the date of Royal Assent.
An October 2025 update on progress with the key pledges made by the Pensions Regulator and other regulators in the government's Regulation Action Plan says that the Pensions Regulator plans to publish guidance to support the consolidation of smaller DC schemes where it is in savers' best interest to do so. It also says that, in early 2026, The Pensions Regulator will ask for master trusts’ asset allocation data as of 31 December 2025 to better understand investment performance and prepare for the launch of the [VfM] framework."
In September 2025, a number of amendments to the Pension Schemes Bill clauses relating to VfM were approved by the Public Bill Committee and added to the Bill. These included the following:
- Updates to the clause on the consequences of a scheme or arrangement having a "not delivering" value for money rating to make it clear that a decision by the Pensions Regulator to require the transfer of the benefits of all (or a subset of) members to another pension scheme or arrangement on the grounds that the transfer could reasonably be expected to result in those members receiving improved long-term value for money, must be based on the trustees' assessment of that point in their action plan. The Pensions Regulator must also be of the view that any other measures for improving value for money set out in the trustees' action plan "are unlikely to result in its achieving an intermediate (or fully delivering) rating or substantially improving" its value for money performance.
- Amendments to ensure that the central database on which value for money data from trust-based pension schemes will be published can be extended for use by contract-based schemes subject to value for money rules to be introduced by the Financial Conduct Authority, and that the data on the database can be shared with the Secretary of State for Work and Pensions.
DC: New guided retirement duty
As indicated in the King's speech in July 2024, the Pension Schemes Bill 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 the government says 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 Pension Schemes Bill has nearly completed its passage through Parliament.
On 19 March 2026 (at Report stage), the House of Lords agreed a government amendment to the guided retirement duty provisions in the Bill to make it clear that default pension benefit solutions must be designed and made available to deferred members as well as active and pensioner members. This "ensures that the framework covers the broad range of individuals for whom it was designed and reduces the risk of misinterpretation."
On 5 March 2026, the Pensions Regulator published analysis of the decumulation options currently offered by occupational DC schemes.
The regulator's analysis was based on data from the 2025 scheme returns of non-micro DC schemes. It will provide a baseline for " monitoring how decumulation offerings and saver…decisions evolve" when the guided retirement duty is introduced.
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."
In terms of earlier amendments to the Bill, a number of changes to the clauses relating to the new guided retirement duty were approved by the Public Bill Committee and added to the Bill in September 2025. These included the following:
- A change to allow "for regulations to provide that particular events (as well as times or intervals) trigger a requirement to review default pension benefit solutions."
- Clarification of the definition of "pension benefit solution".
- Inclusion of a power to set out, in regulations, additional factors (that is, factors in addition to those already set out in the Bill) that trustees or managers must take into account in determining what default pension benefit solutions the scheme should provide.
- Amendments to the "transferable members" clause: where the trustees determine that it is not reasonably practicable for them to design and make available default pension benefit solutions for members or a subset of members, or determine that the pension benefit solutions offered by another scheme will provide a better outcome for members, transferring those members to another scheme which agrees to provide pension benefit solutions for them. Additions have also been made to clarify the trustees duties in relation to these members, to make it clear that transfer could be to a collective defined contribution scheme, and to include a power to make regulations to require certain schemes "to act as schemes of last resort" where trustees cannot find a scheme that is willing to accept a transfer.
- Inclusion of a power to make regulations to require trustees or managers to publish, alongside their pension benefits strategy (or revised pension benefits strategy), set information or evidence as to whether and how they have complied with the guided retirement duty requirements.
- Changes to the "enforcement and compliance" and "corresponding provision in relation to FCA-regulated schemes" clauses.
- Other technical and follow on amendments.
The pensions roadmap released alongside the Bill in 2025 suggests that the government hopes:
- Once the Bill has received Royal Assent the government will follow the regulation-making process for trust-based schemes (and the Financial Conduct Authority will follow its rule-making process for contract-based schemes) in 2026-27.
- The guided retirement duty will apply to DC master trusts from 2027.
- The guided retirement duty will apply to other trust-based pension schemes and to group personal pension plans from 2028.
You can find more information about possible timings, and how the introduction of the guided retirement duty is expected to fit with the introduction of retirement (only) collective defined contribution options, in the "CDC: Making CDC more widely available" entry.
The relevant part of the Bill - Act - is expected to come into force on a date to be set by regulations.
DC: Consolidation of small pots
As indicated in the King's speech in July 2024, the Pension Schemes Bill 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 Pension Schemes Bill has nearly completed its passage through Parliament.
In September 2025, a few amendments to the clauses relating to the consolidation of small pots were approved by the Public Bill Committee and added to the Bill.
These included changes to the clause entitled "further provision about contents of small pots regulations" to make it clear that regulations will be able to confer a right of appeal on any point (not just against the refusal of an application for authorisation as a consolidator scheme), to make it clear that "the small pots data platform operator or the trustees or managers of a relevant pension scheme can be made responsible for paying compensation to an individual who has suffered a loss as a result of a breach of the small pots regulations", and to remove some wording no longer needed because of the Data (Use and Access) Act 2025.
Some more amendments were made at House of Commons Report stage in December 2025. These included: amendments to clause 23 to say that (instead of one "small pots data platform operator") one or more "destination proposers" will be able to propose destinations for small dormant pots; amendments to other clauses to reflect this change; a change to clause 31 to add the Secretary of State to the list of persons (destination proposers and trustees or managers) who can be required to pay compensation to an individual who has suffered a loss as a result of a breach of the small pots regulations; and minor technical amendments.
On 19 March 2026, two changes were made to the small pots provisions at House of Lords Report stage. One was to correct a drafting error and the other was to say that an unused pension pot should be classified as "dormant" after three years, not one. The government is likely to try to reverse the three year change during consideration of amendment, the final Parliamentary stage before Royal Assent.
The pensions roadmap released alongside the Bill in 2025 suggests that the government hopes:
- The Bill will receive Royal Assent in 2026.
- Once the Bill has received Royal Assent the government will follow the regulation-making process in 2027-28.
- Providers will be able to apply for approval to act as a consolidator scheme in 2028.
- Small pots consolidators will be selected in 2029.
- Small pots transfer duties will come into force in 2030 (with sufficient time after the value for money framework has started to apply 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).
The relevant part of the Bill, which consists largely of powers to make regulations, is expected to come into force on the date of Royal Assent.
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, the Pension Schemes Bill 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 "main scale default arrangement" with at least £25 billion in assets under management (AUM) by 2030.
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".
DC master trusts and group personal pension schemes used for automatic enrolment might also need approval that they meet one or more asset allocation requirements (mandatory target(s) for default fund investment in UK or other productive assets). These asset allocation requirements are being described as a government power to mandate investment in UK productive assets/the UK economy. However, the Bill includes some safeguards and, in the workplace pensions roadmap, the government described the power as a "last resort" power.
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 (expected to be by 2035), to apply to regulators to be placed on a "transition pathway". "New entrant pathway relief" will provide a pathway for "new entrants with innovative products offering something significantly different" to reach scale.
- Why this is important
The trustees of DC master trusts and providers of group contract-based schemes used for automatic enrolment are likely to need to comply with the main scale default arrangement requirement by 2030. The government has also said that:
- In the run up to 2030, it expects them to proactively consider consolidating other default arrangements into their intended main scale default(s);
- It expects them to plan for this work before the value for money requirements start to apply and the contractual override is introduced in 2028;
- In 2029 it plans to "establish a ministerial-led review to examine the available evidence and explore the reasons why any default arrangements remain outside the expected 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"; and
- Providers who wish to access the transition pathway will need to make an application to regulators in 2029.
As a result, this change will be significant for DC master trusts and group contract-based schemes. It also has the potential to impact the DC master trust and group contract-based scheme market. In view of this, 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 group personal pension plan to provide benefits going forwards, might like to discuss this change with their advisers.
- Current position and projected timings
The Pension Schemes Bill has nearly completed its passage through Parliament.
On 19 and 23 March 2026 (at Report stage), the House of Lords made a number of changes to the main scale default arrangement provisions in the Bill. The focus of these was removing the power to mandate (the reserve power to require DC master trusts and group personal pensions subject to the main scale default requirement to hold a certain percentage of their assets in UK investments and growth). However, amendments were also made to:
- Introduce a power to create an exemption for a regulator to treat a scheme as meeting the scale requirement if there is no reasonable evidence that consolidation of the scheme would improve member outcomes.
- Require regulations concerning the operation of the scale provisions to have regard "the encouragement of innovation in the design and operation of pension schemes and…the benefits of competition among providers of pension schemes."
- Require the Pensions Regulator to issue codes of practice in relation to the main scale default arrangement requirement.
It seems likely that the government will look to reverse some or all of these amendments in consideration of amendments, the last Parliamentary stage before Royal Assent. In particular, it is likely to look for a way to reinstate a power to mandate.
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 is already known, but it does set out considerations for schemes considering the transition pathway. It also confirms that detailed consultation on regulations will follow.
- The Pensions Regulator published a statement intended to be read with the DWP paper. This sets 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 contains an important message for employers and employee benefit consultants involved in DC selection decisions. This is 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 goes on to set out the factors employers and their advisers should consider when selecting a DC provider.
In terms of earlier amendments to the Bill, a large number of amendments to the clauses relating to main scale default arrangements were approved by the Public Bill Committee and added to the Bill in September 2025. These included the following:
- Amendments to define "main scale default arrangement" and make it clear that a main scale default arrangement can be used by more than one scheme. For example, the clauses dealing with main scale default arrangement approval have been updated to define a main scale default arrangement as "an arrangement (a) that is used for the purposes of one or more pension schemes, and (b) subject to which assets of any one of those schemes must under the rules of the scheme be held, or may under those rules be held, if the member of the scheme to whom the assets relate does not make a choice as to the arrangement subject to which the assets are to be held."
- Expansion of the draft clauses on approval and the scale requirement to say that regulations may make provision about what it means for assets of a pension scheme to be managed under a “common investment strategy”, by addition of the words " including in particular provision defining [common investment strategy] by reference to whether or how far the assets relating to each member of the scheme are allocated in the same proportion to the same investments".
- Changes to clarify when a group personal pension scheme (GPP) will be “qualifying” in relation to a master trust, when a GPP will be “qualifying” in relation to another GPP and when a master trust will be “qualifying” in relation to a GPP. (That is, when "assets held by a connected [GPP] can be counted for the purposes of the application of the scale test to a…master trust", and when "assets held by connected master trusts and [GPPs] can be counted for the purposes of the application of the scale test" to a GPP.)
- A series of amendments to the power for the government to set mandatory asset allocation targets specifically requiring investment in UK (or other) productive assets. These include changes to make it clear that the power applies to assets in default funds (and is not a power to mandate that X% of total scheme assets are productive assets in a default fund), and can be used to set a minimum percentage in relation to all scheme assets held in default funds or a "prescribed description of the assets of the scheme that are so held." Also to remove the reference to "assets…managed under a common investment strategy" from the description of what it means for assets to be held in a default fund for these purposes. (The opposition tabled an amendment which would have removed the power to mandate altogether, but this amendment was not approved.) (The Bill still says that, if the government does use the power to mandate, then it will not be possible to make regulations to increase the prescribed percentage after 31 December 2035.)
- Changes to the "suspension of asset allocation requirement: savers' interests test" clause, including to make it clear that the requirement can only be suspended where meeting it would cause financial detriment to the members of the scheme (not when it would cause financial detriment to members or the scheme).
- Introduction of a new clause ("Information") giving the government power to make regulations requiring master trust trustees and GPP providers to provide asset allocation information to a "Regulatory Authority". The Pensions minister explained that this power has been introduced so that, "in the event that the regulator does not possess crucial information that the government require in order to design the possible asset allocation framework, or to write the report on saver and growth impacts that they will be legally required to produce, the government can obtain that information via the regulators."
- Updates to the "transition pathway relief" clause to make it clear that this relief can only be given if the master trust or GPP has a "credible plan in place for meeting the [£25 billion] scale requirement" before the end of the pathway. (Changes have also been made to provide for transition pathway relief to cease to be available 5 years after commencement of the scale requirement.)
- Changes to the "new entrant pathway relief" clause to make it clear that this relief can only be given where the master trust or GPP does not yet have any members, has strong potential to grow so as to meet the £25 billion scale requirement, has an innovative product design, and meets any other requirements set out in regulations. (The Bill gives the government power to set out in regulations the meaning of "strong potential to grow" and "innovative product design".)
- Amendment of the definition of GPP "so that only schemes where all members [are required to] select their investment approach are excluded".
- Introduction of a new "Risk notices" clause, giving the "Regulatory Authority" power to give a risk notice to a master trust if it considers that "there is an issue of concern" and the master trust "will, or is likely to, cease to meet the conditions for approval…if the issue is not resolved." The master trust would then need to prepare and submit a "resolution plan".
- Introduction of a new "Penalties" clause (regulations can provide for penalties for non-compliance / accepting contributions when not authorised under the new provisions), and a new "Enforcement by the Financial Conduct Authority" clause.
- Introduction of a new clause requiring the Secretary of State for Work and Pensions and the Treasury to carry out a review of any non-scale default arrangements operated.
- Introduction of a new clause giving a power to make regulations to restrict the creation of new default arrangements.
- Introduction of a new clause giving a power to make regulations about the consolidation of non-scale default arrangements into approved main scale default arrangements.
- A number of minor and technical amendments.
More amendments were made at House of Commons Report stage in December 2025. These were:
- To clause 40 to ensure that, when considering whether a master trust can be approved in respect of a main scale default arrangement, the assets of "connected" relevant master trusts and group personal pension schemes can be taken into account. (The meaning of "connected" will be set out in regulations but might, for example, be that the master trusts have the same scheme funder or scheme strategist, or that the group personal pension scheme provider is also the scheme funder or scheme strategist of the master trust.)
- To clause 40 to make similar changes in relation to the approval of group personal pension schemes. This time, regulations might say that a group personal pension scheme is "connected" with another if it has the same provider, and a group personal pension is "connected" with a master trust if the scheme funder or scheme strategist of the master trust is also the provider of the group personal pension scheme.
- To clause 40 to clarify when the five year clock for the repeal of transition pathway relief will start to tick.
- Some minor and technical amendments.
The relevant parts of the Bill - Act - are expected to come into force on a date to be set by regulations. However, the scale requirement cannot apply before 1 January 2030 and the amendment that will require schemes to meet a government-mandated asset allocation requirement will sunset (fall away) if it is not brought into force before the end of 2035.
Other estimated timings are as set out above.
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 Bill 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 Pension Schemes Bill has nearly completed its passage through Parliament.
In September 2025, some amendments to the clauses relating to the contractual override were approved by the Public Bill Committee and added to the Bill.
The amendments were as follows:
- To require that regulations be made to (among other things) define "independence" for the purposes of the requirement that a provider appoint an independent person to certify whether a proposed use of the contractual override is in the best interests of members. "Independent" will have to include a requirement that the person has no conflict of interest.
- To extend the application of the contractual override measure to Northern Ireland pension schemes.
The pensions roadmap released alongside the Bill in 2025 suggests that the government hopes:
- The Bill will receive Royal Assent in 2026.
- The contractual override will be available from 2028.
The relevant part of the Bill - Act - is expected to come into force on a date to be set by regulations.
(NEW) DC: Review of communication and financial promotion rules
On 23 March 2026, at House of Lords Report stage, a new clause was added to the Bill which would require 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 "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."
It is possible that the government will look to reverse this change at the 'consideration of amendments' stage scheduled to begin on 15 April 2026.
