The government has shared its timetable for implementing what is says will be the biggest pension reforms in a generation.
From 2028, larger schemes including master trusts, large single employer schemes and multi-employer contract-based schemes open to new employers will complete and publish new value for money assessments. The changes will be rolled out to all workplace pension schemes from 2029.
The value for money framework aims to drive up standards and ensure savers receive the best possible returns. Savers will be able to see how the returns on their pension schemes compare to others, while the poorest performing schemes will have to improve or close. Schemes will be assessed on their investment performance, costs and charges, and quality of service, and rated from red (poor value) to green (outperforming on value).
Where companies operating schemes fail to act, regulators can issue compliance notices, levy fines or, in serious cases, take steps to wind up the scheme.
Developed with the Pensions Regulator, the Financial Conduct Authority (FCA), HM Treasury and key industry partners, the government says its plan will boost the retirement funds of pension savers and give the industry clarity over the delivery timetable for the reforms.
Torsten Bell, the minister for pensions, said: “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.”
He added: “This is part of the biggest pension reforms for a generation, which are now entering the delivery phase that we are publishing the timeline for today.
“They represent a wide consensus across the pensions industry, who have helped shape plans that also tackle the proliferation of small pension pots, drive the move to bigger and better pensions schemes, and simply the process for savers of turning their hard earned savings into a decent retirement income.”
The government has also published a discussion paper on its flagship scale policy and is inviting industry views on how scale will be assessed.
From April 2030, automatic-enrolment schemes in scope must reach at least £25 billion of assets under management or have at least £10 billion with a credible growth plan to reach £25 billion by 2035.
These ‘megafunds’ will drive up returns for savers via lower fees, higher returns and more diversified investments, the government said.
Sarah Pritchard, the FCA’s deputy chief executive, 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.”
Default pensions will also be introduced so savers reaching retirement will be able to convert their savings into a reliable retirement income. While individuals will be free to choose a different option if they prefer, the system will no longer rely on savers navigating complex financial decisions alone in order to get a decent retirement income.
The delivery plan follows the Pension Schemes Act, which aims to deliver better outcomes for savers. An average saver should see their pension value boosted by £29,000 by retirement
