HL UK Pensions Law Digest 15 January 2026

Welcome to our latest update, in which we cover: 

Value for money (VFM): consultation

• The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) set out details of the new VFM Framework;

Pensions Dashboards Programme (PDP): consultation on the delivery of private sector dashboards

• PDP requests feedback on how to best support the delivery of private sector dashboards, including on how to apply the industry participant approach;

Pension Protection Fund (PPF): FAQs about pre-97 increases

• The PPF answers some questions about increases to pre-97 pensions;

Guaranteed Minimum Pensions Increase Order 2026

• Setting the rate for increasing post-88 GMPs in payment at 3%.

Value for money (VFM) framework: consultation

The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have issued a joint paper (CP26/1) on the new Value for Money (VFM) Framework for defined contribution (DC) arrangements. The paper covers three areas:

• The FCA’s response to its earlier consultation (CP24/16) on the VFM Framework in August 2024;
• For contract-based arrangements: detailed proposed rules and guidance (to be implemented via the FCA Handbook); and
• For trust-based arrangements: a discussion paper to feed into development of regulations under the Pension Schemes Bill.

Consultation closes on 8 March 2026. Alongside the consultation, TPR has issued a summary for occupational schemes.

The FCA, DWP and TPR intend the VFM Framework to be consistent across both contract and trust-based arrangements and to come into force at the same time. Currently, the expectation is that the first VFM assessments will be required in 2028.

Points to note, including significant changes introduced since the previous consultation (CP24/16), include the following.

Scope of VFM Framework

• The VFM Framework will apply initially to auto-enrolment default arrangements and “quasi-default” arrangements (legacy arrangements which predate auto-enrolment and which meet certain conditions) in accumulation which have been operating for at least one calendar year and which have:
  • At least 1,000 members;
  • Fewer than 1,000 members but are the sole default (or quasi-default) arrangement provided by a scheme; or
  • Fewer than 1,000 members and are not the sole default (or quasi-default) arrangement provided by the scheme but are the largest arrangement.
• Arrangements which use the same default fund but which offer commercially different service levels must be treated separately, with a VFM assessment carried out for each arrangement.
• An arrangement which receives members transferred in without consent will automatically be treated as a default arrangement for the purposes of the VFM Framework.
• A trust-based scheme will be exempt from the requirement to produce a VFM assessment if the trustees have:
  • Notified TPR that winding up has commenced,; or
  • Provided evidence to TPR of an agreement in principle with another provider to which members will be transferred.
• Executive pension plans (EPPs) and small self-administered schemes (SSASs) will be excluded from the VFM Framework.

Assessment and rating

• VFM metrics for trust-based arrangements will be set out in regulations. The intention is to use common metrics across trust and contract-based arrangements, to enable meaningful comparisons to be made.
• Forward-looking metrics will be introduced, to be used alongside backward-looking metrics when assessing investment performance. The Framework paper gives details of what may be required under each metric.
• Some disclosure of asset allocation will be required. Details of disclosures expected from trust-based schemes will be included in regulations.
• Arrangements must be compared against a wider commercial comparator group. To enable this wider comparison, arrangements will have to submit their data to a central VFM database. (The previous consultation proposed that arrangements should be compared against three other arrangements.)
• Total costs and charges paid by members and employers must be reported over 1 year, 3 years and 5 years where available, and over 10 years where reasonably practicable to obtain. Reporting for a 1-year period must include the split between service costs and investment charges. For multi-employer arrangements where costs and charges vary, a maximum, minimum, and median must be disclosed for all time periods.
• Metrics to assess how savers engage with pensions will be developed over the medium term, recognising that the new guided retirement requirement and the introduction of targeted support may bring significant change.

VFM assessment and rating

• Following the VFM assessment process will lead to arrangements being given one of four ratings:
  • Red: not delivering value; a bulk transfer to another arrangement must be made where this is in the best interest of members;
  • Amber: not delivering value but the trustees or independent governance committee (IGC) believe improvements are possible within three years;
  • Light green: delivering value but there are areas which could be improved; or
  • Dark green: delivering value and clearly outperforming most in the comparator group; there are minimal areas where improvements could be made.

Actions for poor value arrangements

The VFM Framework and the Bill require the trustees or IGC of an arrangement rated red or amber to take certain actions, including notifying the relevant regulator and employers; closing to new business; submitting improvement plans; and transferring members to a different arrangement where in the members’ best interests.

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The Pensions Dashboards Programme proposes an industry participant group to help deliver private sector dashboards

On 8 January 2026, the Pensions Dashboards Programme (PDP) published a "request for feedback" on how best to support the delivery of private sector dashboards (PSDs). This work is in addition to the PDP's continuing focus on connections to, and the end-to-end testing of, the MoneyHelper pensions dashboard.

PSDs are enabled by legislation. They will become part of the pensions dashboard ecosystem and will connect to the central digital architecture (CDA) provided by the Money and Pensions Service (MaPS), in compliance with MaPS standards.

There is no legal obligation on any party to become a PSD operator; and, where organisations decide to become operators, there is no legislative deadline for connection to the CDA.

The PDP intends to set up an "industry participant group" to help deliver PSDs. This will involve a group of industry organisations working in close collaboration with the PDP, allowing organisations to test and shape requirements or processes early on.

Membership will be restricted to organisations which are actively planning to operate a dashboard. The consultation confirms that membership of the group is not a pre-requisite for becoming a dashboard operator; neither does it guarantee a successful application to the Financial Conduct Authority for authorisation. However, the PDP also notes that participation in the group is likely to provide prospective PSD operators with insight which may be a factor in the speed at which they can develop their dashboards.

The group's remit will include supporting the PDP in a number of areas, including with the iteration of standards/guidance, the development of the CDA functionality and the development of the connection and testing processes.

The PDP suggests that it will seek to put framework agreements and non-disclosure agreements in place for the industry participant group, in order to address commercial sensitivities and encourage organisations to contribute.

The request for feedback closes on 10 February 2026.

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Pension Protection Fund: FAQs on pre-97 indexation

The Pension Protection Fund (PPF) has issued frequently asked questions (FAQs) on the proposed change to the law governing PPF compensation to require payment of inflation increases (capped at 2.5%) on pre-97 pensions in payment in certain circumstances. The legislative changes are included in the Pension Schemes Bill, currently before Parliament.

Points to note include:

• The PPF will be better placed to confirm which PPF members will be eligible for pre-97 increases after the Bill becomes law. The PPF intends to contact eligible members directly in due course.
• The PPF is required to apply increases in January each year and does not have power to pay out of cycle increases. If the Bill becomes law in 2026, the earliest the PPF will be able to pay pre-97 increases is in January 2027.
• The Bill as currently drafted includes discretion for the PPF Board to alter the rate of pre-97 increases (it already has power to do so in relation to post-97 increases). If the Bill becomes law in this form, the PPF Board will then consider its approach to operating this discretion.
• The PPF estimated that, as at 31 March 2025, the cost of providing pre-97 increases on the basis proposed in the Bill would be £1.2bn for the PPF and £300-600m for the Financial Assistance Scheme (FAS).
• The PPF does not expect the introduction of pre-97 increases to impact its levy plans, including its intention to set a zero levy for 2026/27 for conventional schemes. The PPF plans to announce the outcome of its levy consultation by the end of March 2026.

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Guaranteed Minimum Pensions Increase Order 2026

A draft annual increase Order has been laid before Parliament which will increase guaranteed minimum pensions (GMPs) in payment earned between 6 April 1988 and 5 April 1997 by 3 per cent. The Order will come into force on 6 April 2026.

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Authored by Jill Clucas and Susanne Wilkins.