Pension industry bodies and providers have called for greater consistency and clarity as the government finalises the Value for Money (VfM) framework for defined contribution schemes, with the consultation closing tomorrow.
The Investing and Saving Alliance (Tisa) warned that the framework will only deliver meaningful comparisons for pension savers if schemes apply consistent rules and methodologies. It backed the phased implementation but said the first year should focus on regulatory reporting, testing and establishing consistent approaches. It also called for public disclosure and commercial consequences to be delayed until schemes are applying the framework consistently.
Tisa has also called for changes to chain-linking requirements, simpler costs and charges reporting, stronger governance and oversight and a narrower definition of multi-employer arrangements.
Meanwhile, Aegon has called for 2028 to be used as a “true test” phase, with first-year assessments carried out behind closed doors and data and ratings shared only with regulators.
It warned that publishing ratings could expose schemes to commercial and reputational risks if data and assessments are not applied consistently and also called for closed default arrangements not to be required to submit data in 2028.
Standard Life has also called for the first year to operate as a “genuine dry run”, allowing schemes, trustees, providers and regulators to test data and address inconsistencies before ratings and assessments are made public.
Elsewhere, Sackers has called for greater clarity on the final framework, including which arrangements will be in scope, which overlapping reporting requirements will be removed and how employer subsidies will affect assessments.
It welcomed the phased implementation but said the framework is not yet finalised and that further clarity is needed to help trustees and IGCs prepare for the new duties.
Tisa head of policy: products & long-term savings Renny Biggins says: “The Value for Money framework has the potential to improve outcomes for millions of pension savers. Whilst we support the objectives and phased approach for implementation, the framework will only deliver if there is meaningful comparison between schemes.
“This will become particularly important when VfM ratings begin to create reputational and commercial consequences. The industry and regulators need to use the implementation period to make sure everyone is working to an industry-wide approach before data is made public and those consequences take effect.
“We also need to avoid requirements that cut across the wider direction of pensions policy. Chain-linking should not become a barrier to timely consolidation, and the costs and charges requirements should be simplified so the framework remains focused on overall value. We look forward to continuing to work with Government, regulators and firms to ensure the best possible outcomes for UK pension savers.”
Aegon head of pensions Kate Smith says: “We support the aims of the VFM Framework, to provide a comparable, more consistent and holistic way to measure value, helping to improve member outcomes.
“It is encouraging to see the updates to the proposed methodology in this consultation place more emphasis on actual customer outcomes and experience which we have championed in our feedback.
“However, we continue to have serious concerns about the delivery of the policy and potential unintended consequences and call on the government and regulators to use the first year, 2028, as a ‘true test’ phase.
“There’s a real risk that pushing ahead without proper testing could produce a flawed framework with serious adverse implications for schemes, employers and members. This risk is exacerbated by the expectation that final rules and regulations may not be in place until mid 2027.
“The latest consultation proposes a phased implementation of the Framework, but we believe the government should go further.
“Currently it’s proposed that in the first year of the Framework (2028), master trusts, the largest single employer trusts and open firm-designed multi-employer defaults collect and submit their VFM data to the new regulator-built online tool, carry out assessments, assign ratings, and publish data, but with no regulatory consequences for poor value ratings.
“Just because there won’t be regulatory consequences doesn’t mean there won’t commercial and reputational damage consequences. All eyes will be on the published data and ratings with the industry coming under immense scrutiny with information potentially taken out of context. This could be made worse if it turns out that there’s a lack of consistency in how trustees and providers have interpreted their VFM input data, which will influence the comparator data, and how default arrangements are assessed against this.
“We suggest a more proportionate approach in the Framework’s first year, would be for these schemes to carry out their assessments behind closed doors, with data and ratings shared only with the regulators. This would give the pension industry and regulators the opportunity to test the process, take any learnings and make improvements minimising commercial and reputational risk, and crucially not undermining the Framework.
“The consultation proposes that all other closed default arrangements collect and submit their data into the online tool in the first year, even though this group won’t have to carry out any assessments until 2029 and won’t be part of the comparator group. We believe this requirement should be removed in the first year to avoid overloading the online tool and enabling providers to use this time more productively by beginning to use contractual override, available form 2028, to start consolidating poor VFM arrangements into their main scale default arrangements, reducing market fragmentation.”
Standard Life managing director of workplace and retail intermediary Emma Furlonger says: “We welcome the continued development of the Value for Money Framework and support its ambition to deliver better outcomes for workplace pension savers. As the framework moves towards implementation, it is important that it supports the Government’s wider pensions reform agenda, including its ambitions for scale, consolidation and productive investment.
“Comparisons should focus on arrangements that have achieved scale, or are on a credible pathway towards it, so that the framework reinforces the wider direction of reform, supports innovation and long-term investment, and helps deliver meaningful and lasting value for savers.
“Getting the foundations right will also be critical. The final framework should prioritise the metrics that are most meaningful, comparable and useful in assessing value, while avoiding additional complexity that does not materially improve outcomes for savers or employers
“We look forward to continuing to work constructively with regulators and industry partners as the detailed rules are developed, helping to ensure the framework is proportionate, effective and aligned with the Government’s wider ambitions for the pensions market.”
Sackers partner Helen Ball says: “We welcome the recent progress that has been made in developing a more consistent approach to assessing value across the DC market. In particular, the move to a phased implementation timetable should ease some of the pressures on those who are preparing for the new regime. As TPR’s overview confirmed on 11 August, the framework has been subject to a series of consultations but is not yet finalised. Final regulations are due to be published in January and there will also be a separate consultation on a TPR Code of Practice in the first half of 2027. So we don’t yet have the full picture on what VFM will require of trustees and IGCs. It would be helpful to have further clarity on the final requirements as soon as possible, so that the industry can start to prepare for the new VFM duties and plan their resourcing needs over the next couple of years.
“In particular, we need details that would help schemes to identify and assess which arrangements are in scope, confirmation of which overlapping reporting obligations will be removed, and an explanation of how employer subsidies might impact in some way the assessment process. Greater clarity will help trustees and IGCs apply the framework consistently and deliver its ultimate underlying objective of improving outcomes for members.”
