Pensions value for money

All pension savers need to be confident that their scheme delivers value regardless of where they’re invested. We know that short term cost can dominate decision making in the context of defined contribution (DC) schemes, and whilst cost matters investment choices also significantly impact consumer outcomes.

In spring 2024 the FCA will consult on detailed rules for a new value for money (VFM) Framework for DC workplace pensions. This follows earlier joint papers with Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) on such a framework. The VFM framework has been deliberately designed to shift the focus from cost to longer-term value and aims to ensure transparency and delivery of VFM in the market.

The FCA is responsible for the regulation of contract-based defined contribution schemes and is working alongside the DWP and TPR to ensure the new framework is consistent across all DC schemes.

All three organisations will continue to work closely with industry and have been conducting a series of industry working groups to ensure our detailed proposals are informed by the very best industry practice.

Schemes will be required to test their propositions against others in the market to ensure they deliver long term value for savers, including those with the scale to invest in diversified investment strategies. Our requirements around comparisons will consider the latest evidence on the different potential benefits of scale.

The FCA consultation will be an opportunity for industry and other stakeholders to give their views and any feedback will be shared with DWP and TPR. We support TPR’s immediate focus on the value that customers of trust-based schemes are receiving. Ensuring fair value is a central expectation under our Consumer Duty across firms’ product ranges, including in respect of master trusts.