Less than half (48 per cent) of employers have reviewed their workplace pension schemes in the last 12 months to check if they offer value for money (VFM), Towergate Employee Benefits has found, highlighting the need for action before the new VFM requirements come into force.

According to the research, 35 per cent of employers said they had reviewed whether their scheme offers VFM within the past three years, 10 per cent had never done so, and 8 per cent were unsure, with reviews typically assessing charges, default investments, proposition, and service.

The VFM framework, which aims to assess workplace pensions consistently across cost, investment performance, and service, is expected to be implemented in 2026/27, with the first publication of ratings scheduled for 2028.

The framework will utilise a rating system to display the performance of default scheme investments, with results made public, designed to encourage underperforming schemes to improve, consolidate, or exit the market.

Given the upcoming changes, Towergate Employee Benefits client director, Sorangi Shah, said the company was “surprised” at how few employers have recently reviewed their pension scheme on VFM issues.

However, she said that she expects to see this figure increase, stressing that it is “vital” that any review encompasses the “right criteria”.

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

The company also argued that employers should not wait to conduct a review of their pension provision and should enlist a pension professional to carry out an in-depth analysis.

These pension professionals can review broader aspects such as charges, automatic enrolment compliance, salary sacrifice, member engagement and education, retirement options and support, and customise their recommendations to address the specific needs of the organisation.

Furthermore, they can ensure the existing scheme is up-to-date and that it drives value for both the employer and employees, and if it is determined that the scheme is not meeting these criteria, they can explore alternative options.

“Pension schemes are not only a statutory obligation but an invaluable part of the employee value proposition,” Shah continued.

“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.”

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