Quite often, and particularly in social settings, I am asked what I do for a job. Although I want to confirm that my job is very rare, exotic and extremely exciting, trying to explain what a strategic employee benefits consultant actually does is quite testing. When I then throw in the fact that I am involved with workplace pensions too, this tends to lead to a short, sharp end to most conversations, with funnily enough not many people wanting to talk about the topic.
Many of my friends refer to me as Chandler Bing from the US sitcom Friends, as none of the characters actually knew what he did for work either (although I can confirm that this is where the comparison ends!).
Without wanting to disappoint any of my friends, this blog will hopefully highlight my view and knowledge on the extremely exotic and exciting topic of the changing landscape in workplace pensions… so buckle up and here we go!
The Government is reshaping how workplace pensions are assessed, compared, and governed. If you, as an employer, use a contract-based workplace pension, for example a Group Personal Pension, the upcoming Value for Money (VFM) Framework will have real implications for your responsibilities and, ultimately, your employees’ retirement outcomes.
Read on to understand what VFM could mean for your business and your employees.
Why the Value for Money Framework Is Being Introduced
The major challenge in the DC pension market (where a Group Personal Pension would sit) is that employers, employees and sometimes even advisers can struggle to tell whether their scheme genuinely delivers good value, particularly when relying on inconsistent or limited data.
The Government’s new VFM Framework, driven jointly by the FCA, The Pensions Regulator (TPR), and supported by the Department for Work and Pensions (DWP), aims to fix this by creating a clear, consistent and comparable way to assess value across all workplace pension providers.
The framework is intended to drive competition based on the factors that really influence employee outcomes – not just pricing, but also investment performance and service quality. Yay, I hear you cheer!
The Three Pillars Employers Need to Know
The new rules will require schemes to be assessed across three core pillars:
1. Investment Performance
Pension providers must report both historical and 10-year forward-looking investment projections, rather than relying solely on past performance. This helps employers and savers better understand whether their scheme is likely to deliver good long-term outcomes.
Projections must reflect the scheme’s actual investment mix and future return assumptions. Providers will report the data annually, allowing easy comparison between schemes. These forward-looking metrics, combined with service quality, charges and historical results, will feed into the four-tier rating system (more to come on this later).
2. Costs and Charges
Costs remain important, but the new framework shifts away from cost minimisation alone. Providers will disclose costs over 1, 3, 5 and (where reasonable) 10-year periods, helping employers see whether charges are proportionate to performance and quality.
3. Quality of Services
This includes administration, member communications, digital tools and overall governance. Service standards will be assessed using streamlined metrics intended to be more objective and comparable.
A New Four-Tier Rating System: What Employers Will See
One of the most visible changes will be the move to a four-tier VFM rating system, replacing the current red-amber-green model. Under the new framework, schemes will be rated:
- Dark Green – Excellent value; top-tier performance
- Light Green – Good value
- Amber – Requires improvement
- Red – Poor value – intervention required
This expanded scale gives employers a much clearer picture of how their provider stacks up. Crucially, schemes rated Red or Amber must close to new business, and providers will be required to notify contributing employers.
They must also submit an improvement plan to regulators and, in some cases, transfer members to a better-value arrangement. I think this is great news, as this should drive up standards across workplace pension arrangements.
A Central VFM Database: More Transparency for Employers
A central Value for Money database will be created, where all schemes must submit standardised data each year. Providers must submit data annually by 31 March, covering the previous calendar year.
This will allow employers and their advisers to work hand in hand to:
- Compare their pension scheme with market averages
- See how investment projections differ across providers
- Identify underperforming arrangements early
What Does All of This Actually Mean?
1. You Will Have Better Information for Reviewing Your Pension Provider
The new framework gives employers and their advisers a much clearer basis for assessing whether their current pension arrangement offers good value. Employers and advisers will be able to compare ratings, charges and performance much more easily than before.
2. You May Be Required to Act If Your Scheme Underperforms
If your incumbent provider receives a Red or Amber rating, you will need to engage with them about their improvement plan and, in some cases, support a transition to a higher-value arrangement when in employees’ best interests.
3. Communications with Employees Will Become More Important
Employees will become more aware of their scheme’s performance thanks to improved transparency. Employers and advisers may need to explain what the ratings mean and what actions, if any, are being taken in response.
4. Expect a More Competitive Pension Market
From an adviser’s perspective, the good news is that as ratings become public and comparable, providers offering sub-par performance will come under pressure to improve or exit the market. Over time, this should lead to better products and outcomes for your workforce.
When Will This Happen?
The current consultation runs until 8 March 2026, with final rules following thereafter. The first formal VFM assessments are expected to begin in 2028, based on end-2027 data. This gives employers time to prepare, but the direction of travel is very clear.
What Should Employers Do Next?
- Contact your provider and/or adviser to ask how the current provider intends to meet the new requirements.
- Contact your provider and/or adviser to ask how the arrangement’s current performance and charges look.
- Let your employees know what is happening and assure them that you have everything in hand (assuming you have, of course!).
At Wingate Benefit Solutions, we think that the new VFM framework marks one of the biggest shifts in UK workplace pensions governance in a decade. For employers using contract-based workplace pensions, the changes will bring greater transparency, clearer benchmarking and a stronger focus on member outcomes.
At Wingate, we are already amending our Core, Standard and Engage Pension Services to cater for these changes – is your adviser doing the same? If you are not sure or want to find out more about Wingate’s services, please feel free to drop me a line at richard.grover@wbs.e-innovate.dev.
Linking back to the opening paragraph of this blog, “I’ll be there for you”… sorry, I’ll get my coat!
