“What does good value actually mean when it comes to pensions?”
I’m asked that question all the time, most recently by hosts Darren and Nico on the V-FM Pensions podcast. On its surface, it sounds straightforward enough. It feels like the kind of question that you could, in theory, answer with a spreadsheet. But every time I think about it, I find myself going round in circles.
The difficult truth is, value isn’t always about money. It’s just as much about feelings, and whether people’s pensions are making them feel secure, confident, and in control. That’s a difficult thing to measure in a system designed around numbers, forecasts, and decades of delayed gratification.
So, this isn’t an academic answer – it’s an opinion. In this article, I want to explain my view on what value really means in pensions, and why I think we might need to redefine it altogether.
Value is a feeling, not a number
We tend to think of value in terms of performance, fees, and return on investment. But when people talk about value in everyday life, they’re rarely talking about data – they’re talking about how something makes them feel.
Do I feel that I’m getting something worthwhile? Do I feel that I’m on track? Do I feel in control?
That’s the kind of value people look for in pensions too – even if they don’t put it in those words. A pension doesn’t need to outperform the market to feel valuable, but it does need to feel reassuring.
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In pensions, that feeling is elusive because gratification is delayed
The problem is, pensions are designed for the long game. They’re about delayed gratification – you do something good now and, decades later, a different version of you gets the reward.
That’s a hard sell. Most of us struggle to picture our “future self”, let alone get excited about helping them out. When something feels far away and abstract, it’s difficult to feel value from it, no matter how well it performs. That’s not apathy – it’s just human nature.
Even good pension outcomes don’t always feel valuable
Psychologists talk about the hedonic treadmill – the idea that good news makes us happy for a bit, but we quickly return to our baseline. You get a pay rise, you feel great… for about a month.
Pensions are no different. A positive statement, a good investment year – it might spark a moment of satisfaction, but it doesn’t last forever. People get used to it. The emotional “value hit” disappears almost immediately. So, even when the system delivers, it doesn’t necessarily feel like it’s delivering.
We can respond in three ways
If we accept that pensions don’t naturally make people feel good, we’ve got three choices.
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- We can ignore it and accept low engagement as inevitable.
- We can communicate harder, and I’m all for that – more personalisation, better visuals, helping people see their future in human terms.
- Or, we can redesign the system itself to quietly deliver value without requiring people to constantly pay attention.
That last one’s the most radical – but it might also be the best path forward.
DC schemes don’t meet that psychological test of value
Right now, most people are in Defined Contribution (DC) pensions. In a DC scheme, you build your pot, you take the risk, and what you end up with depends on what you put in and how the markets behave.
That sounds fair – but it doesn’t always feel like it. DC gives people control, but it also gives them anxiety. Every market wobble, every headline about inflation, every “should I move my money?” moment chips away at confidence. You might have a decent balance on paper, but if you’re lying awake wondering whether it’ll be enough, how much “value” is that really giving you?
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CDC could restore the balance between control and comfort
This is where Collective Defined Contribution (CDC) comes in. It’s a halfway house between the old Defined Benefit (DB) model – which promised you a guaranteed pension – and today’s DC world, where everything’s on you.
In CDC, members pool their money and share the risk. You don’t get an individual guarantee, but you do get a smoother, more predictable outcome. You don’t have to watch the FTSE every day to feel secure.
Yes, CDC has modelling challenges. But it also has something DC doesn’t: peace of mind built into the design. It shifts the focus from “what am I earning this quarter?” to “will I be okay later?”. That shift is where value starts to feel real again.
Here’s an example. Picture two twins – let’s call them Fred and Frank.
They live next door, earn the same, save the same. Frank’s in a DC scheme. He’s constantly checking his pension app, comparing funds, worrying about markets. As a result of his efforts his car’s a bit newer, his sofa’s a bit nicer, etc… but he’s tense.
Fred’s in a CDC scheme. He’s not tracking the markets, he’s not running projections in Excel. He trusts the system to work broadly as intended. He’s not richer – but he’s happier.
That’s the value. It’s psychological as much as financial.
The future of value in pensions may require state partnership, not just private design
If CDC is going to take off, it might need help from the state. We already have the building blocks – automatic enrolment, workplace pensions. A universal, employment-based top-up system could take it further – something that gives everyone a foundation of shared security, layered on top of private provision.
That kind of hybrid would make value not just an individual outcome, but a collective one – a system where we all benefit from fairness and simplicity, not just investment luck.
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Real value in pensions is psychological assurance delivered through structural fairness
When people ask me what “value for money” really means, I think they’re asking the wrong question. It’s not about squeezing more return from every pound. It’s about designing a system that makes people feel secure, not just be secure – pensions that people don’t have to think about every day. It’s about a system that quietly does its job so they can get on with their lives.
That, to me, is value. Not the kind you can measure on a chart – the kind you can measure in peace of mind.
