CP24/16: The Value for Money Framework

Read CP24/16 (PDF)

Update: The consultation now includes a question on the cost benefit analysis (question 47).

Under the measurement and disclosure element of the Framework, we are proposing that firms be required to produce a machine readable 'flat file' that contains the raw data they will be publishing arranged and presented to a specific template.

Download a template showing our proposed approach (xlsx)

Why we are consulting 

We want to:

• reduce the number of savers with workplace personal pensions that are delivering poor value
• drive better value for money across the workplace DC market through greater scrutiny and competition on long-term value rather than predominantly cost 

The Framework introduces 4 elements. It:

• requires the consistent measurement and public disclosure of investment performance, costs and service quality by firms for all such arrangements against metrics we believe allow VFM to be assessed effectively
• enables those overseeing and challenging an arrangement’s value – Independent Governance Committees (IGCs) and Governance Advisory Arrangements (GAAs) for contract-based schemes – to assess performance against other arrangements and requires them to do so on a consistent and objective basis
• requires public disclosure of assessment outcomes including a 'red, amber, green' (RAG) VFM rating for each arrangement
• requires firms to take specified actions where an arrangement has been assessed as not VFM (red or amber)

While this consultation relates to rules for FCA-regulated firms operating contract-based pensions, they are based on previous work with the Department for Work and Pensions (DWP) and the Pensions Regulator (TPR) and are designed to be suitable for application across the DC workplace pensions market.  

Who this is for

We encourage firms operating contract-based workplace pensions, their IGCs and GAAs, and the trustees of trust-based schemes to respond to this consultation. We welcome feedback from:

• firms operating contract-based workplace pensions
• IGCs and GAAs
• trustees and sponsors of trust-based schemes  
• DC pension scheme savers and beneficiaries  
• pension scheme service providers, other industry bodies and professionals
• employers
• civil society organisations
• consumer organisations / representatives with an interest in pensions capability / financial capability
• pensions administrators
• any other interested stakeholders

Next steps 

Please consider our questions in Annex 1 of this paper.

We welcome feedback by 17 October 2024 using the form on the Contents page. You can:

• use the online response form
• write to us at VFM Policy Team, FCA, 12 Endeavour Square, London E20 1JN
• email us at [email protected]

Unless you ask us not to, we will share your response and consider it jointly with DWP and TPR.

We will in due course publish a final policy statement including Handbook rules and guidance setting out the VFM Framework to be implemented.

We intend to offer roundtables and stakeholder events that will include discussion of practical considerations to inform the development direction of the Framework. We will consider implementation timings following stakeholder feedback and in discussion with DWP, the Treasury and TPR.

Government has recently announced its intention to bring forward primary legislation which will contain measures to apply the framework to trust-based schemes. We will continue to develop its approach to implementation in light of this.

Background

We have evolved our proposed VFM Framework through our earlier Discussion Paper and subsequent Joint Consultation with DWP and TPR.

We set out our overall proposed approach in a Joint Response.