Pensions minister Laura Trott said the shake-up of private pensions will also include reform of the charge cap on a company's "default" defined contribution (DC) pension schemes that employees are offered or auto-enrolled in.

The aim is to close an "inequality gap" between DC schemes and defined benefit or DB schemes, where typically more generous payouts are linked to an employee's past earnings. These schemes are being phased out to new employees due to cost. DC pension schemes' performance is tied to swings in stock and bond markets.

"The value for money framework will improve transparency, comparability, and competition between defined contribution pension schemes and help deliver the best possible value and long-term outcomes for pension savers," Britain's ministry for work and pensions said in a statement.

"Being in an underperforming pension scheme can lead to someone missing out on thousands of pounds."

Encouraging a cultural shift across the DC pensions market from focusing on cost to overall value will also encourage market consolidation, allowing more schemes to benefit from the economies of scale, the ministry said.

Schemes would have to disclose their investment performance, costs and charges, and quality of service via clear and comparable metrics, the statement said.

They would have to provide comparisons with at least three other schemes to prevent providers from choosing underperforming schemes for comparison purposes.

Schemes will also have to spell out if they invest in "illiquid assets" such as start-up companies, renewables and infrastructure, the ministry said.

The proposals have been developed in conjuction with the Financial Conduct Authority and The Pensions Regulator (TPR).

"It is clear that value for money is not just about costs and charges. These proposals will help ensure that schemes deliver against value for money in the round," FCA executive director for markets, Sarah Pritchard, said.

The ministry said it was also considering TPR should have new powers to close down a pension scheme that is consistently not offering value for its members.

(Reporting by Huw Jones, Editing by Louise Heavens and Jane Merriman)

By Huw Jones