Savers will be able to see how well their pension scheme is performing and compare it to others under changes the government has described as the “biggest pension reforms in a generation”.
Over the next three years, ministers say they plan to create a public league for pension schemes, claiming it will help tackle a performance gap that is leaving members £5,000 worse off over five years.
Under a new Value for Money framework, schemes will be assessed on their investment performance, costs and charges, and quality of service and rated from red (for poor value) through to green (outperforming on value).
The poorest-performing schemes will be required to improve or close.
Where they fail to act, regulators will be allowed to issue compliance notices, levy fines or in serious cases take steps to wind up the scheme.
From 2028, larger schemes, including master trusts, large single-employer schemes and multi-employer contract-based schemes, which are open to new employers, will complete and publish these assessments.
Torsten Bell, the pensions minister, 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.”
Here are three other pension changes on way…
Guided retirement
From 2029, pension providers will be expected to offer savers a default retirement income option, which could combine annuities, drawdown or other solutions. Savers will still be free to choose a different option or transfer their pension elsewhere.
Pensions Dashboard
The Pensions Dashboard will bring together details of people’s state pension and private pensions in one place. It will show where pensions are held, their current value and an estimate of the income they could provide. The MoneyHelper dashboard is expected to launch next year, with other providers to follow.
Workplace pension consolidation
New rules will encourage smaller workplace pension schemes to merge into larger ones from 2030. This could mean some savers are moved to a different pension scheme, although their pension savings will remain protected.
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