By Joey Patel, Director of Policy, TPR
Millions of people will rely on their defined contribution (DC) workplace pensions to support them in later life. We want to ensure they receive good value outcomes – and we know trustees want the same for their members. To make that achievable, we have worked closely with the Financial Conduct Authority (FCA) and the Department for Work and Pensions (DWP) to develop the value for money framework.
The consultation and discussion paper, launched jointly with the FCA and DWP on 8 January, sets out proposals designed to make it easier to assess and compare value across the market to support better decision-making.
Trustees will need to publish clear data on their scheme’s performance, costs and quality of service. Through driving greater transparency and setting clear and consistent expectations, the framework is designed to raise industry standards, identify underperforming arrangements and drive meaningful improvements.
Where a scheme is not delivering value, trustees or providers would be expected to improve performance or consolidate out of the market, so that savers get the value they deserve.
Why trustee engagement is vital – especially now
The proposed VFM framework will apply across contract- and trust-based DC schemes, regardless of size, ensuring that all savers benefit from strong value and robust oversight.
That’s why it’s so important that trustees respond. We need your views to help shape the framework.
As the framework will be implemented for trust-based schemes through DWP legislation under the Pension Schemes Bill currently before Parliament, your feedback now will be particularly valuable and timely in developing the legislation – and in time our regulatory approach. Help us get it right.
What’s new?
We’ve been working carefully with the industry, the FCA and DWP for some time to develop our proposals and earlier feedback has been crucial to shaping and improving the framework.
The key adjustments to the proposals are as follows.
A new colour coded rating. Value for money assessment outcomes will be shown in a colour rating, giving a clear, at a glance picture of whether value is being delivered and where action is needed. We now propose a four-point rating system to allow top performers to be identified: dark green for strong performance, light green for good value, amber for improvement, and red for poor value.
Forward looking investment metrics. Introducing forward-looking metrics, alongside existing backward-looking metrics, as part of the VFM assessment, to reflect what an investment strategy aims to deliver over time.
A centralised data solution. We also want your feedback on our proposed single route for easily submitting and analysing VFM data to streamline reporting, support consistent comparisons across the market and strengthen oversight.
Read our guide – and have your say
Our overview for trust-based DC schemes is designed to help you understand the proposals in the consultation and engage meaningfully with them, including those who have not engaged with the VFM framework before. It provides an overview of the framework and highlights the proposals most relevant to trustees. It explains how assessment and reporting would work in practice – and sets out where we are specifically seeking your views.
Read the consultation and share your feedback with us by 8 March.
We need your views to ensure we get it right. Your input will help shape the standards that will define saver outcomes for years to come.
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