What's Happening in DC

Between July and September 2029, DC master trusts and Financial Conduct Authority (FCA) regulated schemes will be required to:

·       design, and make available to each eligible member of the scheme, one or more default pension benefit solutions; and

·       at least in such circumstances or at such times or intervals as may be prescribed, review the design (and if appropriate the number) of the default pension benefit solutions. 

Single-employer DC trusts (SETs) will be required to comply between July and September 2030.

A "pension benefit solution" must be designed to deliver DC benefits to eligible members of the scheme generally or a subset of them in the form of a regular income in their retirement. According to the Government's updated roadmap published on 14 July 2026, the Department of Work and Pensions (DWP) has established an Industry Delivery Group and Member Interests Group to allow it to consult on more thorough and considered policy proposals in autumn 2026. A FCA discussion paper on the equivalent requirements for contract-based schemes will be published at the same time.

Trustees can make arrangements with another scheme where it is not reasonably practicable for them to design and make available default pension benefit solutions, although trustees would still need to determine that the alternative arrangement would provide a better outcome for members than any default pension benefit solution they could make available. Trustees will need to consider how this is communicated to members as there is no new power to transfer any member without their consent.

The roadmap says that the DWP is working closely with the FCA to ensure default pension benefit solutions and targeted support provisions complement each other. The Government is looking to ensure that all pension members are offered good quality support to manage their pensions, regardless of how their pension provider is regulated. 

In advance of this autumn's consultation, on 13 July 2026, the DWP published a policy paper outlining its policy intent in relation to the design and implementation of guided retirement solutions. It confirms that the regulations will provide clarity about the nature of default pensions. However, they are not intended to be overly prescriptive. Pension schemes will need to have strong and effective governance in place to ensure they are developing appropriate default pensions to meet the needs of their members.  DWP's key principles and expected outcomes for guided retirement are:

·       No requirement for complex decision-making by the member - For most savers, the only decision required will be when to access their pension and whether to remain in the default pension or choose an alternative. The requirements in the PSA2026 also ensure that decumulation decisions made by trustees and scheme managers are driven by the interests of their members. 

·       Protection against longevity risk - A crucial element of default pensions is that they must provide a retirement income that lasts throughout a member's retirement. Trustees and scheme managers, however, will have flexibility about how to deliver this and so default pensions could incorporate different phases, such as a flex then fix approach.  

·       Maintaining freedom of choice for members - The Government recognises that some people may want to make their own decisions, particularly if they have higher levels of pension wealth or more complex circumstances. Alongside introducing default pensions, the Government is committed to ensuring that individuals can get the right support with their pension choices, including through high quality financial advice, Pension Wise, and the introduction of targeted support, where it is made available.

·       Obtaining member consent at the point when members first access their pension. The Government sees this as an opportune time to maximise engagement to fully explain the default pension and spell out that there are other options available. At this point, members will need to agree to start receiving payment via the default pension. This is the key consent moment. If a default pension includes different phases (such as a flex then fix approach), members should be informed at the point of access and throughout their pensions journey about when their ability to make a different choice would become restricted, but schemes will not be expected to seek consent multiple times.

On a related note, on 13 July 2026, the DWP also issued an interesting research publication on decumulation and decision-making. It is a report of findings from 55 qualitative interviews with individuals aged between 53 and 67 with varying income, health, pension pot size, employment histories and family circumstances.  The sample captures the range of experiences and challenges individuals face as they consider their retirement options with some points to note being:

·       People accessed pensions for a range of reasons, including reaching State Pension age, health or work changes, bereavement, divorce or to supplement income. Health and caring responsibilities were particularly influential, pushing some towards early or unplanned retirement, meaning respondents were accessing pensions sooner than planned.

·       Understanding of pension access routes varied considerably. The 25% tax-free pension commencement lump sum was the most widely understood and often the only option respondents felt confident about. Knowledge of drawdown, annuities, fees, charges and investment risk was generally low, with many struggling to differentiate between products or assess long-term implications.

·       While most understood that DC pots were invested, only a few actively engaged with investment decisions.

·       Understanding of the State Pension was clearer, but its sufficiency was a common concern. Confidence mapped closely onto understanding.

·       Respondents fell broadly into low, partial and high confidence groups. Low-confidence individuals tended to avoid engaging with pensions due to anxiety and limited knowledge. Those with partial confidence understood the basics but struggled with more complex decisions and often delayed taking action, whereas high-confidence respondents were proactive and more able to evaluate options.

·       Decisions were shaped by income security, lifestyle expectations, work demands, health, family responsibilities and long-term outlook. Many hoped to maintain a comfortable lifestyle and support family members, while worrying about making mistakes, running out of money and uncertainty about the future.

 The proposed implementation timetable for default pension benefit solutions is:

·       The DWP will consult on the draft regulations between July 2027 and September 2027 (alongside an FCA consultation on its draft rules);

·       The final regulations and FCA policy statement will be published between July 2028 and September 2028.

·       The Pensions Regulator (TPR) plans to consult on its guidance sometime between April 2028 and June 2028.

·       The DWP is working closely with the Financial Reporting Council (FRC) to explore the development of standardised approaches to pension illustrations, including for common forms of decumulation (including Retirement Collective Defined Contribution (R-CDC)) and for individuals during the decumulation phase. These standards are also intended to be published between July 2028 and September 2028.

With the aim of making R-CDC schemes a viable default option under the Guided Retirement framework, DWP will consult in Autumn 2026 on a targeted, time-limited extension for schemes committed to that route. R-CDC regulations are expected to be laid in Q4 2027, with legislation and TPR's code coming into force and authorisation opening in Q4 2028, meaning the first R-CDC schemes could be authorised between April and June 2029.

Separately, the FCA has already published its near-final rules for advisers to provide "targeted support" to consumers in relation to pensions and retail investments.  Firms will be able to make suggestions designed for groups of consumers with common characteristics, to help them make financial decisions.    

On 13 July 2026, the DWP and FCA published the latest joint consultation on the value for money (VFM) framework, including draft regulations and FCA rules. The deadline for responses was initially set as 1 September but following stakeholder representations, it has now been extended until 15 September 2026. The consultation sets out several changes to the framework since the joint consultation by the FCA and TPR earlier this year (on which see our briefing), with a focus on allowing sufficient lead-in time for the new regime.

By way of reminder, the VFM regime will apply to default arrangements of workplace DC pension schemes – i.e. the default strategy of qualifying auto-enrolment (AE) schemes and legacy "quasi-defaults" which predate AE. Executive Pension Plans and Small Self-Administered Schemes will be excluded from the framework. Exemptions will also be available for contract-based arrangements closed to new employers that are undertaking a transfer of all members to another arrangement and trust-based schemes that have notified TPR that they have commenced wind up.

The main changes are:

·      Consequences for poor value: No formal VFM consequences (including closure measures) will apply in the first assessment cycle in 2028. In a welcome change, the consequences will take effect only from 2029 onwards.

·       Phased implementation: Full VFM assessments and ratings in 2028 will be required only of master trusts, large SETs (50,000+ members) and open multi-employer contract-based schemes. Smaller SETs and legacy/bespoke arrangements will submit data only, without publication, until 2029 when full disclosure and assessment obligations will apply to all in-scope schemes.

·       Data collection window: The initial data collection period is shortened from a full calendar year (January to December 2027) to a half-year window of July to December 2027, to allow adequate lead-in time and for FCA rules and DWP regulations to be put in place first.

·      Timing of publication: DWP is consulting on whether data submitted in March should remain private until November, when schemes publish their assessment reports, so that comparative data enters the public domain alongside those reports rather than in isolation.

·    Decumulation comparators: The comparator group at the 0 years-to-retirement (YTR) point will be tailored to match decumulation strategy (e.g. targeting annuity purchase or drawdown), rather than comparing all arrangements against the same commercial comparator group. The full comparator group is retained for the 30 YTR point.

·       Investment performance methodology: Arithmetic averaging is replaced by a geometric averaging methodology based on representative members' actual experience as they approach retirement. The 5 YTR data point is removed as redundant under the new approach.

·       Forward-looking metrics: The requirement for third-party advice on forward-looking metrics is removed and replaced with mandatory disclosure of underlying assumptions, with the aim of reducing cost while preserving scrutiny.

·       Assessment of investment performance: Multi-employer cohort tables will not be used for assessments, shared with other providers or published in the first year. For multi-employer arrangements, the median net investment performance at scheme level will be disclosed to participating trustees and independent governance committees (IGCs), with aggregated average minimum and maximum figures made available for comparison purposes.

From March 2028 providers will be able to transfer members from contract-based pension arrangements which are found not to be providing value to those that are. This will enable them to consolidate the large number of arrangements that currently exist in the market. The aim is that the consistent and comparable data produced as part of VFM can be used as the evidential basis for the best interests test that providers will need to meet, to show that any use of the contractual override provisions will lead to a better outcome for members.  

On 11 August 2026, TPR published an overview of the VFM framework for trust-based DC schemes which contains some practical information for trustees and scheme managers on how they can start preparing to comply. It contains the following suggested preparatory steps:

·       Map scope: identify all default and quasi-default arrangements and understand which of these are likely to be in scope arrangements.

·       Review data availability: work with advisers, providers, administrators and investment managers to identify the data that will be required for VFM and to agree how and when this will be made available to you.

·       Test costs and charges data: consider performing a gap analysis exercise of your ability to provide the metric data required for the framework.

·       Review investment data processes: think about how you will approach the calculation of backward-looking and forward-looking metrics, what assumptions you will apply and how those assumptions will be documented.

·       Consider service metrics: identify the sources of your service quality data and test how robust and consistent that data is.

·       Plan governance: start to put in place mechanisms for the trustee board or relevant committee to manage readiness, verify data quality, and provide assurance for the assessment process and sign-off VFM ratings. 

On the same day. TPR also published a technical overview of the VFM digital service. This has been produced in response to industry feedback that early information on the VFM digital solution would be helpful before the consultation ends on 15 September 2026. It provides an overview of the proposed digital solution (also referred to as the ‘value for money database’) and how it will support trustees and IGCs to meet their obligations.

The DWP also issued a discussion paper on key elements of the DC pension scheme scale policy on 13 July 2026. As reported in WHiP 122, with strong opposition from the House of Lords, the scale requirement was one of the last points to be finalised in the PSA2026. The scale requirement is designed to ensure that DC master trusts and group personal pension plans (GPPPs) have a main scale default arrangement (MSDA) of at least £25 billion by April 2030 or the end of 2035 where transition pathway relief has been granted.  

Employers will not be able to use a scheme that is not approved as having MSDA of £25 billion in assets from 2030 (or £10 billion if applying for the transition pathway) to meet its AE obligations. 

The assets that make up a scheme’s MSDA are to be managed under a common investment strategy (CIS). In addition, schemes which are connected will be able to "share" a MSDA where the assets held within it are managed under the same CIS. This will be possible where the schemes are operated within a single corporate group. 

The consultation focuses on the key elements of how scale will be assessed, being the MSDA, the CIS and the connections that will be allowed between schemes to meet the scale thresholds. The paper states that where a single provider has more than one multi-employer DC workplace scheme that will be subject to the scale requirements, they will be able to combine the assets in their master trusts and GPPs into a MSDA. This is subject to all assets in the shared MSDA being managed under a single CIS and meeting the requirements to be connected.  Unconnected schemes (by which is meant schemes that are operated by different providers that are not in the same corporate group) will not be permitted to contribute to or benefit from the same MSDA. 

The deadline for feedback is 7 September 2026 and the DWP will be holding roundtables with industry stakeholders to discuss the elements set out in the paper, as well as other matters that need to be considered for the scale policy. The updated roadmap notes that the DWP expects to consult on draft regulations in late 2027, with consultation on TPR's Code and the FCA guidance to follow during 2028. Applications for approval/ the transition pathway and assessment periods will commence during 2029.

Fiduciary Duty and investment decision-making: Another aspect of the PSA2026 which was voted down by the House of Lords was a proposed power to give the Secretary of State statutory power to issue guidance in relation to how trustees exercise their fiduciary duties in relation to investment under section 36 of the Pensions Act 1995. Whilst the guidance will no longer have statutory force, a Technical Group and a separate Advisory Group has been working on a draft. A consultation on the guidance is expected this summer, with the guidance being published in Q1 2027.

Small Pots: The PSA2026 gives the Secretary of State power to make regulations "for the purpose of securing that small dormant pension pots held by auto-enrolment schemes are … held by 'consolidator schemes' or in the case of consolidator schemes that have more than one arrangement, are held subject to consolidator arrangements."

Regulations must permit eligible master trusts to apply to TPR for authorisation to act as a "consolidator scheme".  The PSA2026 also addresses authorisation by the FCA of contract-based schemes.

An initial consultation will be published between July and September 2028 and will focus on exploring the framework for establishing default consolidator schemes, alongside further consideration of the underpinning infrastructure required to support pension pot consolidation. It will also examine the appropriate eligibility criteria and potential exemptions within the system. The draft regulations will be consulted upon between April and June 2027, alongside consultation on TPR's Code of Practice and the FCA rules.

The role and responsibilities of ceding schemes will be considered in a subsequent phase of consultation, expected to be launched between October and December 2027. Small pot consolidation is not expected to begin until April to June 2030.

We will be monitoring and seeking to shape these reforms as they develop.  Please do get in touch if you would like to discuss anything in the meantime.