Speaking on 20 March 2026, the Chief Executive of The Pensions Regulator made it clear that delivering better outcomes for members depends on high-quality investment governance and decision making. The purpose of the new value for money (VFM) framework is to encourage decision-makers to look beyond cost and focus on investment outcomes.
However, achieving this shift is complex. WTW's response to the recent consultation on the proposed VFM framework noted that measurement is challenging, and that an overly narrow focus on investments risks missing the broader picture around member outcomes and service quality.
Employers and trustees may therefore wish to take a more holistic view, using the assessments already available in the defined contribution (DC) market, rather than assuming that the new VFM framework will satisfy all their aims.
For providers, the new VFM framework, alongside the scale requirements, represent a future-critical challenge. The framework has the potential to drive rapid consolidation across the DC market but also carries the risk of creating an oligopoly, where following the herd becomes more attractive than innovating.
DC market measurement and employer subsidies
The DC market is critical for the future of retirement provision. Around 16 million people save into a DC pension, with nearly 10.8 million active DC memberships in trust-based schemes (including master trusts). Importantly, there are almost twice as many non-active memberships, which makes long-term investment returns even more crucial.
We remain supportive of a consistent VFM framework across all workplace-saving vehicles but believe that employer subsidies should be included where an employer actively supports a scheme. Ultimately, what the member receives on retirement is the essential part of a good outcome. Under the proposals, the employer subsidy cannot be included in the outcome of a VFM assessment itself, although disclosure alongside the assessment will at least provide important context.
Backward-looking measures – the power of hindsight
As the focus shifts away from costs, reporting on investment returns becomes one of the principal elements of the VFM assessment. Performance will be compared with a commercial comparator group, enabled by a central VFM database, rather than with a selection of three other arrangements as previously proposed.
Our concern is that the performance effects of costs remain prominent, which may run counter to the stated aim of focusing on overall value. Net investment performance is the true driver of member outcomes; gross performance cannot be divorced from the costs incurred to deliver it.
More broadly, it remains essential to remember that past performance is not indicative of future results, and historic data should not be relied upon alone.
Forward-looking projections
The proposals now include a forward-looking metric. The fear about such a metric in 2024 was that there would be too much scope for gaming the system. However, we are broadly comfortable with the 2026 proposals; they support a more rounded assessment, recognise that strategies can change (making backward-looking metrics less informative), and enable genuine innovation. Crucially guardrails, such as mandatory third-party advice on assumptions and six-year record-keeping, should help limit abuse.
That stated, in the early years of this reporting there is likely to be disparity in assumptions making this metric difficult to compare until there is some greater consensus on the assumption-setting approach. We also believe that where trustees or providers choose to depart from third-party advice, they should be obliged to document and explain their rationale for doing so.
Quality of services – a challenge to assess
Measuring and comparing admin has been a challenge for some time. Differences in scheme design and reporting methods make standardised measures challenging. This is an area where we have first-hand experience of helping own-trust, master trust and independent governance committees in trying to get insight into their comparative performance. This is challenging across a host of metrics, and we're particularly concerned over some of the metrics giving a fair comparison. Metrics linked to requests for immediate retirement income and lump sums may hide a lot due to member choices or scheme structure – for example lump sum payments may be taken while retirement income is deferred, sometimes for years.
The 2026 VFM proposals recognise that measuring saver engagement is even more complex, and as a result the VFM framework is extremely limited. Negative engagement can be measured through complaints, but positive engagement is captured solely through the percentage of members nominating a beneficiary for death benefits. While this simplicity may help administrators facing near-term pressures (such as 2027 inheritance tax reforms, pensions dashboards, etc.), it is too narrow to reflect genuine member engagement.
Recognising this limitation, the framework allows service metrics to downgrade, but not upgrade, a provisional VFM finding. This risks signalling that service quality is of secondary importance and reinforces a heavy emphasis on investment returns.
We are clear that, from a broader industry perspective, the service metrics are not sufficiently developed. Therefore, we recommended that the regulators take more time to develop broad appropriate metrics for quality of service, rather than proceed with a framework that relies on such limited engagement metrics.
Red, amber, light or dark green?
The consequences of a negative rating are serious, with red- and amber-rated schemes barred from accepting any new employers and required to communicate their findings to existing ones.
To support consistent assessments, we believe the whole industry would benefit from clear examples of the types of evidence that would typically justify each rating, particularly when schemes sit close to the rating boundaries. It is also important to ensure that the rating structure does not inadvertently disincentivise a continuous improvement mindset.
There is also a concern about statutory triggers. Trust-based schemes that remain in an intermediate category (such as light green) for several consecutive years may be treated as if they were in the "not delivering" category (red, even when performance is stable).
Some conclusions
Creating a general framework of this nature is challenging, particularly when the consequences of failure are significant, and it is important that the regulators take the time needed to achieve the right outcomes. For employers and trustees reviewing their existing arrangements, these reforms will not take effect before 2028 and may still only offer limited scope and insight.
We fully support the need for consistency across types of arrangement. The value framework must ensure that value is delivered to pension savers and to sponsoring employers supporting these pension arrangements. Our view is that the existing assessment framework for trust-based schemes already allows for a more detailed perspective, helping employers and trustees understand where their arrangements stand and whether it may be timely to reconsider them. However, it is important that this framework incorporates a holistic view of the market, bringing together insights into broader provider offerings – something our DC Provider Research Team delivers to our clients.
