The Pension Schemes Act 2026 puts a statutory Value for Money framework behind trust-based DC schemes, built around the same three metrics the FCA is applying to contract-based arrangements. Here is what advisers need to know before the first ratings land.

In reading this article you will understand:

  • What the Value for Money framework will actually measure, and how the three core metrics and the ratings scale work.
  • How the trust-based framework under the Pension Schemes Act 2026 relates to the FCA’s parallel framework for contract-based schemes, and where the two diverge.
  • How to start assessing a client’s scheme against the VFM criteria now, ahead of the first formal assessments.

The Pension Schemes Act 2026 (c. 22), which received Royal Assent on 29 April 2026, introduces a statutory Value for Money framework for trust-based defined contribution schemes. Once the supporting regulations are in force, trustees will have to assess their scheme’s default arrangement annually against a set of prescribed metrics, benchmark it against the rest of the market, and publish the result. The framework mirrors work the FCA has been developing separately, and for longer, for contract-based schemes, so a member enrolled through an insurer-run group personal pension will in time see something close to the same disclosure as a member of a trust-based master trust. Understanding what VFM will actually measure matters now, well before the first assessments land, because it gives you a working answer to a question employer clients are increasingly likely to ask: how is our scheme going to score?

What VFM Will Actually Measure

VFM is built around three metrics, and it’s worth being precise about what each one covers. The first is investment performance: schemes must measure and disclose net investment returns for the default arrangement, reported on both a forward-looking and a backward-looking basis, and net of costs so the figure reflects what a member actually keeps rather than the fund’s headline return. The second is costs and charges: the full picture of what members pay, not only the annual management charge but transaction costs and any other deductions from the pot. The third is quality of services, a broader category covering things members actually notice: how quickly and accurately core financial transactions are processed, the quality of scheme record-keeping, and how easily a member can find and understand their pot. None of the three is meant to stand alone. A scheme that wins on cost but loses on returns, or scores well on service but invests too cautiously to deliver adequate outcomes, is exactly the case VFM is designed to surface.

Schemes are then rated against the market on a consistent basis. The original proposal used a three-tier red, amber, green scale, but the DWP and FCA’s further joint consultation, published in January 2026, moved to a four-tier scale instead: dark green and light green both count as delivering value, amber means a scheme isn’t delivering value now but has a credible path to do so within three years, and red means it doesn’t and can’t. An amber rating triggers a formal improvement plan, and under the January 2026 proposals both amber and red arrangements are barred from taking on new business, meaning no new employers can join. A red rating starts a process that can end with members being transferred into a better-performing scheme where that is judged to be in their interests. tPR has also been given the power to issue a directions notice substituting the rating it considers should have been assigned, subject to a tribunal appeal.

One Framework, Two Regulators

The trust-based and contract-based versions of VFM are built to reach the same broad outcome, but they run through different regulators and different legal mechanics. Advisers need to keep the two straight. For trust-based schemes, the framework sits in the Pension Schemes Act 2026 and will be fleshed out through DWP regulations, with tPR responsible for supervision and trustees carrying the legal duty to assess and publish. For contract-based schemes, principally group personal pensions and workplace group SIPPs, the equivalent duty sits with the FCA under its own rulebook, following consultations CP24/16 and, most recently, CP26/25, with providers and independent governance committees doing the assessing rather than trustees. The stated policy intent from both regulators is consistency: broadly the same three metrics, and a comparable ratings scale, applied to whichever default arrangement a scheme uses for auto-enrolment. The two frameworks are still being finalised on separate tracks, though, and a scheme sponsor running both a trust-based scheme and a legacy GPP, which is common after a provider switch, may find they land on different timetables.

The Timetable, and Why It’s Still Moving

Both frameworks are still in development, so treat the dates below as directional rather than fixed. On the trust-based side, DWP regulations are expected during 2026/27, with tPR indicating further guidance for schemes will follow once its joint work with the FCA concludes. On the contract-based side, the FCA’s CP26/25, published on 13 July 2026, ran to September 2026, with final rules expected in 2027. Both regulators point to the first formal assessments landing in 2028 for larger arrangements, meaning master trusts, single-employer schemes of 50,000 members or more and multi-employer contract-based arrangements open to new employers, with the rest of the market following in 2029. This is exactly the kind of framework where detail moves between consultation and final rules, and the quality of services metrics in particular are still being worked through. The four-tier scale is itself a response to industry pushback: the Society of Pension Professionals and the PMI both argued that under the original red, amber, green proposal anything short of green read as outright failure. Whether the split between dark and light green does enough to answer that remains to be seen.

What It Means for Advisers

There is no need to wait for the statutory deadline to start having this conversation. The three metrics are a useful lens for a scheme review now, whatever the regulatory position: how does the default arrangement’s net investment performance compare with the market, what is the all-in cost to members once transaction costs are included, and how does the administration stack up on the things members actually notice? Our own annual workplace pension provider ratings already assess schemes against broadly comparable ground, covering performance, cost and service quality, and reviewing where a client’s provider sits in that comparison gives a reasonable working answer to how it’s likely to fare once VFM becomes a statutory requirement. For a scheme sponsor, having a considered, evidenced answer to what would our VFM rating be beats being taken by surprise when the first statutory assessment lands. It is also a natural opening for an adviser to show ongoing value on a corporate mandate between full scheme reviews.

Things to reflect on for CPD

  • How would you currently answer a scheme sponsor who asked how their default arrangement would score against VFM’s three metrics: investment performance, costs and charges, and quality of services?
  • Which of your corporate clients run a legacy contract-based arrangement alongside a newer trust-based scheme, and do you know which VFM timetable each one will follow?
  • How would you use Benefits Guru’s ratings, or comparable third-party benchmarking, to give a client an early read on their likely VFM outcome?
  • What would you want a scheme sponsor to have in place before an amber or red VFM rating became a real possibility, rather than a hypothetical one?