Pensions Insight: February 2026

January was relatively quiet for pensions, but there were still some key developments to consider. Here we provide a full round-up of key developments in January as well as an in-depth focus on the Financial Reporting Council’s actuarial guidance on the Pension Schemes Bill’s Virgin Media legislative remedy.

Key January pensions developments include:

• House of Lords’ consideration of the Pension Schemes Bill
• Financial Reporting Council actuarial guidance on the Virgin Media legislative remedy
• The current proposals from the FCA/ DWP and TPR on the new Value for Money framework that will be introduced in 2028
• Details of what the forthcoming DWP guidance on fiduciary investment duty will contain
• Confirmation that the Pensions Commission final report on retirement outcomes and proposals for change is expected in the first half of 2027
• Government confirmation that it will not financially compensate women born in the 1950s for its communication failings about increases to their state pension age (SPA)

Other developments of note

Legislation: Pension Schemes Bill progression through Parliament: House of Lords Committee stage 12 to 26 January 2026

The House of Lords carried out its Committee stage detailed review of the Pension Schemes Bill between 12 and 26 January 2026.

One of the Lords’ proposed amendments was to remove the legal proceedings exclusion from the Virgin Media remedy provisions. 

There was considerable debate on key provisions, including:

• concerns raised regarding the skeletal nature of the Bill, which means much of the detail which will be contained in secondary legislation cannot be examined; and
• on certain aspects of the defined contribution (DC) megafund proposals, including the sunset mandatory investment power which will allow the Government to dictate minimum investment levels in UK private markets. 

Despite these concerns, no substantive changes were made to the Government’s key proposals. 

Consultations, statutory reviews and enquiries

DC: FCA, DWP and TPR joint consultation on value for money framework 

On 8 January 2026, the Financial Conduct Authority (FCA), the Department for Work and Pensions (DWP) and the Pensions Regulator (TPR) published a joint consultation on value for money (VFM) proposals which will, from 2028, significantly change how DC contract and trust based arrangements assess VFM by: 

• shifting the focus from cost to value; and 
•  requiring: 
  • publication of performance, costs and service quality data; 
  • a rating of VFM against four outcomes; and
  • in the case of poor value, imposing improvements or a transfer to a better scheme.

What does the joint consultation cover?

The current consultation covers three matters:

• the FCA’s response to its earlier 2024 consultation;
• proposed detailed rules and guidance for contract-based schemes; and
• an invitation for feedback from trust-based scheme stakeholders which will inform the legislation – the new VFM framework will be applied consistently across both trust and contract-based arrangements with the rules for trust-based schemes being implemented through the Pension Schemes Bill and associated regulations.

TPR overview guide

TPR has produced an overview guide for trust-based DC schemes to aid understanding of the consultation proposals, with an overview of the framework referencing those parts that are most relevant to trustees. 

What will the new VFM framework look like?

There are four main parts to the new framework:

• Part 1: consistent measurement and disclosure – measuring through specific metrics and publishing investment performance, costs, and service quality data;
• Part 2: objective comparison – against a commercial market group;
• Part 3: public disclosure of assessment results; and
• Part 4: rating system – a four-point rating system with specific action required for underperforming arrangements.

Which schemes will be in scope of the new VFM framework?

It is proposed that the new VFM requirements will apply to workplace pension members of default and quasi-default arrangements in accumulation that have been operating for at least one calendar year. 

Default arrangements cover those where automatic enrolment contributions are invested without the employee making an active choice. Quasi-default arrangements cover a pre-automatic enrolment arrangement that is treated like an automatic enrolment default. 

Executive pension plans and small self-administered schemes will be excluded from the VFM framework. 

To be in scope, the arrangement (default or quasi-default) must have at least one of the following: 

• at least 1,000 members; or 
• fewer than 1,000 members but be the sole default/ quasi-default; or 
• fewer than 1,000 members, is not the sole default/ quasi-default but is the largest.

The requirements will mean that most single employer trust-based DC arrangements will be caught, regardless of size.

What changes have been made to the initial proposals?

Several changes have been made to the 2024 consultation proposals.

• Investment performance metrics: will be both backwards and forward-looking to allow for helpful comparisons, and to fit in with policy intent. There will be guardrails for managing risks such as inappropriate assessment, gaming and investment herding.
• Service quality metrics: the initial proposal was for service quality to include five indicators (secure, prompt and accurate transactions, service satisfaction, retirement support, adjusting pension, and engagement support). The metrics for the last three will now be developed together with the industry over the medium-term, given the challenges encountered, and working out how they will fit in with the new Guided Retirement duties and Targeted Support Regime.
• Costs and charges metrics streamlined: instead of requiring up to a 15-year period assessment, the framework will cover total cost/ charge data over one, three and five years where available, and ten years where reasonably practicable to obtain (the same approach will be taken on historic investment performance information). 
• Comparator group for assessing value: instead of comparing the assessed arrangement against at least three other in-scope arrangements, the comparison will use a commercial market comparator group (including open, multi-employer arrangements that from year two have a value rating). This will “allow a more objective and consistent approach”.
• Four-point rating system instead of three to “allow identification of top performers”: 
  • RED: not value. “Cannot be improved to reach value – must transfer where in best interests of members” – if not in best interests, must improve where possible. Must close to new employers. Must submit action plan to regulator by 30 November.
  • AMBER: not value. “Can be improved to reach value” within 3 years. Must close to new employers. Must submit improvement plan to regulator by 30 November.
  • LIGHT GREEN: value. “Improvements could be made to increase value” – expected to be more common.
  • DARK GREEN: value. “Clearly outperforming, no or few improvements could be made” – expected few will have this rating.

• Disclosure using a central VFM database: rather than schemes publishing VFM data and assessments on individual websites. This follows feedback that using individual websites would make access and comparisons difficult. The reporting cycle will be based on the calendar year with a reporting end date of 31 December and a publication date of 31 March. The plan is to require uploading of VFM data, but whether to require VFM assessment publication as well is still being considered. 

Next steps

The joint consultation closes on 8 March 2026. In addition to FCA VFM rules and guidance, new regulations will be introduced under the Pension Schemes Bill for trust-based schemes, accompanied by changes to TPR regulatory materials – all will, where appropriate, undergo consultation. 

Subject to parliamentary progress of the Pension Schemes Bill and associated regulations, the new VFM assessments are anticipated to start in 2028. The Government expects that the first set of VFM metrics will have to be published by schemes in March 2028, with the first assessment reports and ratings being disclosed in October 2028. 

Schemes likely to be in scope should start thinking about the forthcoming requirements and what they might mean for their DC offering, including timings so they are ready for implementation of the new framework.

Details provided of forthcoming guidance for trustees on their investment duties

Responding to a written parliamentary question, the pensions minister has confirmed that the forthcoming fiduciary duty investment guidance for pension trustees will include:

• clearer and more practical support on how trustees can consider wider factors within their legal obligations;
• clarification on the trustees’ ability to take account of system-level risks (e.g., climate-related risks) and the impact of investments on members’ long-term outcomes;
• consideration of how trustees may take account of members’ views in keeping with investment in members’ best interests; and
• ‘reaffirming’ that trustees should consider all financially material matters in investment decision-making.

The guidance will be produced ‘in partnership’ with the pensions sector and other stakeholders, starting with an industry roundtable.

Other news

Pensions Commission final report on retirement outcomes and proposals for change due in first half of 2027

On 7 January 2026, the Pensions Minister confirmed that the Pensions Commission’s final report is expected in the first half of 2027. The Government announced in July 2025 that the Pensions Commission will look at “why tomorrow’s pensioners are on track to be poorer than today’s and make recommendations for change” and “consider the long-term future of our pensions system”.

Government decides not to set up financial compensation scheme for failings to communicate increases to SPA to women born in the 1950s

After revisiting its December 2024 decision, the Government has confirmed that it will not be setting up a financial compensation scheme for those women born in the 1950s who the Parliamentary and Health Service Ombudsman (the PHSO) concluded should be financially compensated because the Government failed to provide accurate, adequate and timely details of SPA increases. 

Following a judicial review application by the Women Against State Pension Inequality campaign group, which included reference to a 2007 research paper that had not been considered as part of the Government’s December 2024 decision, the Government decided to revisit the communications part of its decision. 

After doing so, although the Government accepts that there was a 28-month delay between August 2005 and December 2007 in sending individual letters, it believes the PHSO did not properly consider evidence that most 1950s-born women would not have definitely read and recalled the letter, and therefore sending a letter earlier would not have affected the choices they could or would have made. Furthermore, a financial compensation scheme would be “neither fair nor feasible and would not represent good value for taxpayers, and, as a consequence, one will not be set up.”