Less than half of employers have reviewed their workplace pension scheme within the last 12 months to check that it offers value for money in terms of charges, default investment, proposition, and service. And a concerning 10% have never reviewed their workplace pension scheme. This is according to new research.

The research asked UK employers:

When did you last review your workplace pension scheme to check it offers value for money?

Within the last 12 months                            48%

Within the last 3 years                                   35%

Never                                                                 10%

Don’t know                                                      8%

Sorangi Shah, client director, Towergate Employee Benefits says: “New regulations being proposed mean workplace pensions will need to demonstrably offer value for money; we’re surprised at how few employers have recently reviewed their pension scheme, and expect to see this figure increase, but it’s vital that any review encompasses the right criteria.”

The research also found that only just over half (52%) of companies have a pension governance structure in place, such as an internal pension committee, formal governance board, or external adviser.

Value for Money regulations

The new Value for Money regulations that the UK government and regulators are proposing will introduce a framework which aims to assess workplace pensions in a unified approach across cost, performance and service.

A “red-amber-green” RAG rating system will be used to determine how scheme default investments are performing and will be publicly disclosed to incentivise underperformers to improve, consolidate or leave the market. The regulation process is expected to take place in 2026/27, with the first publication of data being in 2028.

Carrying out the right analysis

Employers should not be waiting to conduct a review of their pension provision. They should enlist a pension professional, so in-depth analysis can be carried out. They can review broader aspects such as charges, automatic enrolment compliance, salary sacrifice, member engagement and education, retirement options and support, and tailor their recommendations specific to addressing the needs of their organisation. They can make sure the existing scheme is up-to-date and driving value for the employer and employee, or if it isn’t, they can look at alternative options.

Sorangi Shah explains: “Pension schemes are not only a statutory obligation but an invaluable part of the employee value proposition. Often pension costs can be a significant proportion of the employee benefits budget, therefore it is important they demonstrate value for money for employers and employees. A well-run pension scheme can be a huge asset to a company in terms of employee satisfaction, engagement and, therefore, recruitment and retention.”

The new framework aims to push employers to gain greater clarity and a better understanding of the pension scheme they offer. It is recommended that employers seek expert professional advice. This should not only ensure compliance but also optimise outcomes. A pensions and benefits expert will be able to support the employer by evaluating their current scheme to ensure it offers value for money, and advise on ways to improve and enhance their offering.