Are employers getting good ‘Value for Money’ from pensions?

It will require workplace pension schemes to assess and compare their performance across three core pillars – investment performance, costs and charges, and quality of services. 

The framework continues to evolve, with recent updates introducing forward-looking metrics alongside historical performance – recognising that value isn’t just about past results but future potential. 

Under VFM, schemes must assess whether they’re delivering value, compare themselves against others, and take action if they’re underperforming. That means greater transparency, better governance, and better outcomes for pension schemes and their members.  

It’s a great way to shift our thinking away from the narrow focus of pension costs towards outcomes for savers – the returns they can achieve, the service they receive, and the retirement income they can expect. But what’s missing here is the employer perspective... 

What about value for employers? 

The VFM framework rightly focuses on member outcomes, recognising that better engagement leads to better decisions – such as increasing contributions or consolidating old pots. It also acknowledges that driving value means looking beyond just costs to the full picture of what savers receive. 

But we need to consider the employer perspective, too. 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. 

Consider the work that goes into businesses’ salary structure. Businesses benchmark against competitors, analyse market trends, and adjust compensation packages to win talent. Salaries are clearly understood as strategic. 

Pensions, by contrast, tend to be approached as a box-ticking exercise. The focus often stays narrowly on compliance: “What do we have to provide?” 

But pensions represent a huge untapped opportunity. They can be just as effective as salaries in driving the three R’s: recruitment, retention, and reward. Let’s look at how. 

Turning pensions into a competitive advantage 

Here’s the key point: a well-designed pension scheme can give you the edge in attracting the best employees. So what makes the difference? 

Let’s look at three things: 

• Investment proposition: A strong investment strategy – one that balances risk and return, invests in diversified assets, and demonstrates consistent performance. At Cushon, a key part of our Sustainable Investment Strategy focuses on private market investments, particularly ones that have a positive impact on our UK home turf. This kind of tangible, real-world investing genuinely engages employees, as I’ve argued in the past. 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, we’re proud of our app and our new digital assistant, Iris, which helps employees find and combine their old pension pots. It’s proving a great success so far – because Iris does the hard work for you.  

• 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. 

When value works both ways

Here’s what matters: member value and employer value aren’t competing priorities – they’re two sides of the same coin. When your pension scheme delivers strong investment returns and high-quality service, your employees benefit through better retirement outcomes. But you 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 perhaps it’s time to ask different questions. Not so much, “Are we compliant?” but more, “Does this scheme help us win and keep talent?”. Rather than ask, “What are the charges?”, think more in terms of “What’s the total value being created here – for our people and our business?” 

If we’re serious about value for money in pensions, we need to recognise that value matters just as much to employers as it does to savers. 

Book a free review of your pension scheme 

Wondering if your pension is delivering strategic value for your business? Get in touch with our team today to arrange a free review of your workplace pension arrangements. We’ll show you where the opportunities are – and how to turn your pension from a compliance cost into a competitive advantage. 

Article by

Steve Watson, Director of Policy & Research