Government launches next phase of pensions reform

The Government has unveiled the next phase of its programme of defined contribution (DC) pension reform under the Pension Schemes Act 2026, publishing an updated roadmap for implementation, together with a series of supporting consultations and policy documents. These reforms aim to improve value for money, retirement outcomes, and market efficiency. The current consultations on the VFM Framework and Scale Policy will close in early September.

Consultation on Value For Money (VFM)

The Department for Work and Pensions (DWP), Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have launched their final consultation on the new Value For Money (VFM) Framework for workplace DC pensions, alongside draft regulations.

Following feedback on the earlier consultation (CP26/1), the proposals have been refined to simplify implementation while maintaining the framework’s policy objectives. Key changes include:

• First VFM assessments in 2028 for Master Trusts, large single-employer trusts (with 50,000 or more members), and open multi-employer contract-based schemes
• Some transitional provisions in the first year, including a six-month data collection period (July to December 2027), no VFM-specific consequences for red or amber ratings, and temporary changes to investment-performance comparators. Different provisions will apply for smaller, legacy, and bespoke arrangements
• Full implementation of the VFM Framework for all in-scope schemes from 2029
• Investment performance will be measured using geometric averaging, better reflecting members' investment experience and making the five-years-to-retirement metric redundant
• Schemes will be required to disclose the assumptions underpinning forward-looking projections, replacing the proposed requirement to obtain third-party advice
• The Government is seeking views on delaying publishing VFM database results until November, after schemes have published their reports to provide greater context

Consultation closes on 1 September 2026. Final DWP regulations for trust-based schemes are expected by January 2027 and the FCA final rules for the contract-based market in Q1 2027. According to the updated roadmap, further TPR guidance is expected this summer and a Code consultation in early 2027.

Guiding principles for Guided Retirement

The DWP has published a policy paper setting out the key principles and expected outcomes for default pensions during the Guided Retirement phase. In summary:

• Limited member decision-making, with trustees and managers responsible for designing and managing default pension solutions. For most members, the main decisions will be when to access their pension and whether to remain in the default or choose an alternative
• Protection against longevity risk to provide members a suitable income throughout retirement
• Freedom of choice at the time of accessing benefits, supported by Pension Wise, targeted support, and high-quality financial advice, where appropriate
• Member consent to enter a default pension arrangement, without requiring consent at multiple stages. A default pension can involve different phases (such as a ‘flex then fix’ approach) that restrict future freedom, provided this is clearly communicated to members

Master Trusts and FCA-regulated workplace schemes will need to comply with the Guided Retirement requirements from summer 2029, and single-employer trusts from a year later.

Recognising that Guided Retirement and retirement-only CDC (R-CDC) arrangements are closely linked, the DWP is considering a time-limited extension for schemes planning to adopt an R-CDC default pension. Proposals are expected in autumn 2026, with regulations in force towards the end of 2028.

Discussion paper on key elements of the Scale Policy

The DWP has published a discussion paper seeking industry views on the operation of default arrangements and investment strategies in multi-employer DC schemes used for automatic enrolment, including group personal pensions (GPPs) and Master Trusts. Key themes include:

• Defining what assets should qualify for inclusion within the legal definition of a main scheme default arrangement (MSDA)
• Better understanding the links between schemes that exist within providers’ corporate groups
• Confirming that unconnected schemes will not be permitted to contribute to, or benefit from, the same MSDA
• Clarifying the boundaries of a common investment strategy (CIS), including whether investment variations beyond member age should be permitted

Consultation deadline is 7 September 2026. A consultation on the scale regulations is planned for the latter part of 2027, followed by consultations from TPR and the FCA in early 2028. The scale thresholds are expected to apply from April 2030.

Pension Schemes Act 2026 – evaluation strategy

The DWP has published its approach to assessing the success of the Pension Schemes Act 2026 reforms. The evaluation framework will track whether key measures – including the VFM Framework, scale requirements, and guided retirement reforms – deliver improved saver outcomes, stronger retirement incomes, and a more efficient pensions market.