The gap between the best and worst performing pension schemes could cost a saver with a £10,000 pot over £5,000 across just five years. But reforms in the pipeline could give savers the transparency they need to switch to schemes on top of their game.

A timetable to implement the biggest pension reforms in a generation has been published by the Government, showing how millions of savers potentially stand to benefit over the coming years.

The nattily-named “New Value for Money” framework will, for the first time, require pension schemes to measure and publish how they perform against the best in the market.

In effect, savers will be able to see if their pension scheme is “top of the league” or in the “relegation zone” and help tackle a performance gap that is currently leaving an average saver with a £10,000 pot over £5,000 across just five years.

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).

Where they fail to act, regulators can 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 Value for Money assessments.

The changes will be rolled out to all workplace pension schemes from 2029.

Torsten Bell, Minister for Pensions, said: “The stakes are high, when the gap between the best and worst performers could cost a saver with a £10,000 pot over £5,000 across just five years.

“This is part of the biggest pension reforms for a generation, which represent a wide consensus across the pensions industry, who have helped shape plans that also tackle the proliferation of small pension pots, drive the move to bigger and better pensions schemes, and simplify the process for savers of turning their hard-earned savings into a decent retirement income.”

The Government has also published a discussion paper on its flagship “scale policy” – which will build a market of fewer but much larger “megafund” pension schemes intended to drive up returns for savers via lower fees, higher returns and more diversified investments.

The framework has been developed with the Pensions Regulator (TPR), the Financial Conduct Authority (FCA), HMT and key industry partners, and Sarah Pritchard, the FCA’s deputy chief executive, said: “This framework puts savers first.

“For the first time, it creates a consistent way to compare value across workplace pensions, bringing transparency to the outcomes that really matter.

“Default pensions will also be introduced so that savers reaching retirement will be able to convert their savings into a reliable retirement income.

“This means that, whilst individuals will always be free to choose a different option if they prefer, the system will no longer rely on savers having to navigate complex financial decisions alone in order to get a decent retirement income.”

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