With changes on the cards, will they be enough to address issues relating to pensions adequacy?
Published: 8 October 2026
Authors: Kunjan Sembhi
What is pensions adequacy?
Pensions adequacy essentially looks at whether an individual’’s pension saving, in conjunction with any state pension entitlement, will be enough to provide an adequate income in retirement, when measured against expectations. With fewer people having defined benefit pensions linked to their salary, there have been concerns over whether defined contribution (DC) arrangements are a good enough replacement.
The Pensions Commission was originally set up in 2002 to review the pensions system. Changes were made as a result of its findings, however, in 2025 the government relaunched the Pensions Commission as “too many future pensioners face incomes that are too low, risks that are too high and a system that is too unequal”.
In its interim report, the second Pensions Commission found that “with fewer retirees set to receive defined benefit pensions and significant gaps in existing policy, this report shows that there remains much work to be done to ensure income adequacy in later life”. The VFM framework, along with other measures introduced by the Pension Schemes Act 2026, are designed to help achieve this goal.
Some of the key issues facing savers today are:
- multiple pension pots: on average UK workers have 11 different jobs in their lifetime – each may have a separate pension arrangement
- longevity: the number of people aged 75 or over is projected to double between 2025 and 2075: a rise of 6 million
- the Gender Pensions Gap women aged 55-59 have approximately half (54%) the pension wealth of men of the same age; and
- State Pension changes: the State Pension age is now 66 for both men and women and will rise to 67 over the next 2 years.
What is the new VFM framework?
The new framework for DC schemes is intended to “deliver better retirement outcomes” and to “provide greater transparency over how arrangements are performing”. Schemes will be publicly rated, with poorly performing arrangements required to improve or transfer benefits elsewhere.
The proposals feature:
- a four-point rating system (red, amber, light green or dark green)
- comparison against a much wider commercial comparator group
- an online central data repository to disclose VFM data from all in-scope arrangements
- forward-looking metrics alongside backwards-looking metrics.
The new VFM framework is expected to have phased implementation from 2028.
What else is being done to address inadequate saving?
At Shoosmiths’ recent seminar in September that discussed pivotal issues in pensions, none of the attendees asked believed that the new VFM framework alone was enough to address concerns over pensions adequacy. This might not be surprising, given that the reforms to the VFM framework are only one measure designed to address under saving.
Other changes include:
- automatic small pot consolidation: automatic enrolment schemes will be required to transfer small pension pots to authorised consolidators if they (i) are £1,000 or less in value (but not nil) and (ii) have had no contributions paid into them or any active investment decisions made in respect of them in the last 12 months. The measure is intended to avoid small pots being eroded by fees
- pensions dashboards: digital services which an individual can use to search the records of all connected pension schemes to confirm whether they are a member. The aim is to allow individuals to see all their pension information in one place online, ideally reuniting members with forgotten or lost pensions so they can understand the value of their pension benefits to help with retirement planning
- default pension benefit solutions: trustees of DC schemes will be required to develop ways for members to receive their pension without the member having to make complex choices about how they want to receive those benefits
- scale requirements: there are new requirements for DC multi-employer schemes (i.e. master trusts and GPPs) to operate a main scale default arrangement which has at least £25 billion in assets under management from 2030 otherwise the schemes will no longer be qualifying schemes for auto enrolment purposes
Is this enough?
It is hard to say whether these measures will be sufficient to address under-saving. The second Pensions Commission’s final report is expected in Spring 2027 and will make recommendations to the government for a pensions system that is “adequate, fair, and sustainable”. The Work and Pensions Committee has been tasked with reviewing the minimum contributions under the auto-enrolment regime, and its work is expected to feed into the Pensions Commission’s final report.
It is clear the government and the industry are aware of the under-saving problems, and work is being done to address the issues. The reforms in the Pension Schemes Act 2026 are being implemented in stages and all are expected to be in force by 2030. The pensions dashboard is expected to be publicly available in the 2027/28 financial year. It will be some time until the impact of these changes is seen, but at least attention is being paid to an epidemic of under saving for retirement. It might be too late for some members, but hopefully the changes can help some see a substantial difference in their retirement outcomes.