Defined contribution (DC) schemes must put investment performance and member outcomes ahead of marginal differences in charges as the industry moves towards a more consolidated system of larger schemes and stronger retirement defaults, The Pensions Regulator (TPR) chair, Emma Douglas, has said.

Speaking at the Sackers Pensions Conference, Douglas argued the forthcoming value for money (VFM) framework would be one of the most important tools for improving outcomes, adding that the market had historically focused too heavily on fees because they were easier to measure than future investment performance.

She said providers were often priced within one to five basis points of each other, creating a risk that attention was being placed on “the pennies of difference in charges rather than the many pounds difference in overall returns”.

“VFM puts performance net of fees back at the heart of the conversation and includes forward-looking metrics, so we are not entirely focused on the rear-view mirror.”

She suggested that a 1 per cent improvement in investment returns for an average saver starting at age 22 could result in a pension pot around 30 per cent larger.

Douglas also highlighted current default fund performance data suggesting that, over five years, a £10,000 pot could be worth 46 per cent more in a high-performing scheme than in a poorly performing one.

“That’s a huge difference,” Douglas said.

“While we were looking after the pennies, the pounds weren’t necessarily looking after themselves.”

TPR will work with the Financial Conduct Authority (FCA) on the VFM framework, with trustees and independent governance committees expected to assess their own performance, while the regulator will consult on a code of practice setting out how those assessments should be conducted.

Douglas also stressed the importance of better retirement defaults, noting that most DC members do not actively choose their pension.

She described many savers as “triple defaulters”, remaining in their scheme’s default investment option, contributing at the default rate and retaining the default retirement age.

Around 75 per cent of DC pension holders aged over 45 do not know they need to decide how to access their pension at retirement, Douglas noted, while only one in four currently has a plan for accessing their funds.

She said well-designed default pensions would therefore be central to TPR’s aim of getting more people on track for a secure retirement.

However, Douglas cautioned against adopting a single default for every saver, arguing that housing, health, family circumstances and other wealth could influence which retirement solution was most appropriate.

“We don’t expect one size to fit all in terms of defaults,” she stated.

Getting members into suitable cohorts would require both trustees to design appropriate defaults and members to provide information about their circumstances, she added.

Looking ahead, Douglas stressed that the workplace pension system remained “unfinished business”, with almost 15 million people under-saving and 43 per cent of working-age people not currently on track for a secure retirement.

She argued that the next phase of reforms should focus on sustainable retirement income, stronger investment performance, clearer information and better default options at retirement.

Technology would also play an increasing role, she noted, with better data supporting pensions dashboards and responsible use of artificial intelligence (AI) potentially improving decision-making, engagement and regulatory oversight.

However, she warned that AI adoption would need strong governance, accountability and cybersecurity.

Douglas concluded that the reforms represented an opportunity to improve outcomes for a new generation of DC savers.

“Our task now is to get better outcomes for everyone who participates,” she said.

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