Employers deserve Value for Money from pensions too

The VFM framework is a step in the right direction for employees' pensions, but we still need to ask about value for employers?

What does Value for Money mean in the context of pensions? If you're not already familiar with it, Value for Money (VFM) is a regulatory framework that requires workplace pension schemes to assess and compare their performance across three core pillars – investment performance, costs and charges, and quality of services.

It’s something that the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have been committed to introducing for DC pension schemes for some time and was first proposed under the previous government.

On paper, the framework is a great thing, marking a big shift in how we think about pensions. For years, the industry was locked in a race to the bottom on costs. But the VFM requirements move us beyond that narrow perspective.

With VFM, the focus is rightly on outcomes for savers – the returns they can achieve, the service they receive, and the retirement income they can expect.

Schemes must assess whether they’re delivering value, compare themselves against others, and take action if they’re underperforming. All things being equal, that should mean greater transparency, better governance, and better outcomes for pension schemes and their members.

The focus shifts from “How much will it cost?” to “What are members actually getting for their money?”.

This is absolutely the right direction. But there’s still a question we’re not asking loudly enough: what about value for employers?

What VFM gets right

The VFM framework is built on the belief that driving value will in turn increase saver outcomes. And it’s not just looking at direct value-adds but also value enablers like engagement.

For instance, it aims to address one of the key challenges with auto enrolment: namely that, as millions of workers are placed into pensions by default, most savers never actively choose their scheme, their contribution levels or their investments.

So what we have is an inertia-driven system that lacks sufficient engagement to help drive better outcomes. Better engaged savers make better decisions, like opting to pay more into their pension.

However, the missing piece of the puzzle here is the employer.

What about value for employers?

Pensions are typically the second-largest payroll cost for UK businesses, sitting just behind salaries. Yet while companies invest heavily in pay benchmarking to ensure competitive compensation, pensions are often treated as little more than a compliance obligation.

Think about how much effort goes into businesses’ salary structure. HR teams analyse market data, compare roles against benchmarks, and adjust pay to attract and retain talent. Salaries are understood as a strategic tool.

But for pensions, the conversation too often stops at “What's the minimum we need to provide?”

So, there’s a missed opportunity here, because pensions can be just as effective as salaries in driving the three R’s: recruitment, retention, and reward. But how?

A great workplace pension is a competitive advantage

The key thing to understand is that a well-designed pension scheme is a competitive advantage. To unlock that advantage means more than just ticking regulatory boxes. It requires the same strategic thinking you’d apply to any other significant business investment.

Here are three things that can make the difference:

Investment proposition: A strong investment strategy – one that balances risk and return, invests in diversified assets, and demonstrates consistent performance. As part of its Sustainable Investment Strategy, Cushon focuses on private market investments, particularly ones that have a positive impact on UK turf. This kind of tangible, real-world investing genuinely engages employees. Driving that emotional connection can make a big difference to your pension offering.
Technology and user experience: The best schemes use intuitive apps and digital platforms, with clear communications that make it easy for employees to stay on top of their pensions and make informed decisions. At Cushon, our app and our new digital assistant, Iris helps employees find and combine their old pension pots.
Communications that resonate: A pension is only valuable if employees understand and engage with it. That means creating communications that make pensions relevant at every stage of the member’s journey – from onboarding all the way through to retirement planning. Financial education plays a crucial role here, by helping employees make informed decisions about contributions, investments, and pension drawdown.

These are elements that, if you get them right, can turn pensions into something employees genuinely value and appreciate. And that translates directly into recruitment advantage, better retention, and stronger reward messaging.

Value for everyone

The key takeaway is this: value for members and value for employers are interconnected. When your pension scheme delivers strong investment returns and high-quality service, your employees benefit through better retirement outcomes. Employers benefit too – through reduced turnover, easier recruitment, and a workforce that feels supported and valued.

The VFM framework has rightly put member outcomes at the centre of pensions regulation. That’s progress we should celebrate. But why stop the conversation there? A pension scheme is a major business investment and, like any investment, it should offer returns for employers, too.

So why not start asking different questions when evaluating your pension scheme? We need to move away from “Are we meeting our regulatory obligations?” to “Is this scheme helping us to attract and retain the people we need?” We need to stop simply asking “What are the charges?” to “What’s the total value this delivers to our business and our people?”.

If we’re serious about value for money in pensions, it’s time to recognise that “value” is just as important for employers as well as savers.

Head over to the NatWest Cushon Resource Hub and unlock access to research, expert insights and event recordings – all designed to help you maximise pension savings for your business and your people.