PS21/12: Assessing value for money in workplace pension schemes and pathway investments: requirements for IGCs and GAAs

Open consultation: CP20/9
Consultation closes
Policy Statement
Q4 2020
Policy Statement: PS21/12

We are issuing our final rules on how Independent Governance Committees (IGCs) and Governance Advisory Arrangements (GAAs) should compare the value of pension products and services and promote the best value for pension scheme members. 

Read PS21/12 (PDF)

Why we are introducing new rules 

We want to make it easier for IGCs and GAAs to compare the value for money (VFM) of pension products and services. These new rules are a step towards a more systematic and transparent framework for assessing VFM in pensions, which will enhance IGCs’ ability to compare pension products and drive VFM on behalf of consumers they represent.

This policy statement summarises feedback received to CP20/9 and sets out our final rules. 

Who this applies to

The new rules will affect workplace pension stakeholders such as:  

  • IGCs and GAAs and their advisers 
  • all firms that provide pathway solutions and providers of FCA-regulated workplace pension schemes 
  • third party firms that provide GAAs 
  • workplace scheme members and their employers 
  • consumer representative groups 
  • trade bodies representing financial services firms 
  • charities and other organisations with a particular interest in the ageing population and financial services 

Background to this value for money in pensions work

This work stems from our commitments in the FCA and The Pensions Regulator (TPR) joint regulatory strategy for regulating pensions and the retirement income sector.

IGCs currently oversee the VFM of workplace personal pensions and investment pathway solutions provided by firms like life insurers and some self-invested personal pension (SIPP) operators. Consumers in workplace personal pensions are often less engaged with their pension savings and do not always have the expertise to assess the VFM of their pension scheme. IGCs are independent from providers and act on behalf of consumers, to provide an additional layer of protection and scrutiny.

In 2020, we consulted on targeted measures specifying a definition of VFM and the 3 key elements that a pension provider’s IGC or GAA should take into account in assessing VFM. The 3 key elements are costs and charges, investment performance and quality of services. These rules also require that IGCs should compare their provider’s offerings with other similar propositions on the market as part of the VFM assessment.  

The most significant issue raised in the feedback to CP20/9 was around the level at which this comparison should be conducted. To address concerns, our final rules allow IGCs some flexibility to decide how best to conduct the comparison. 

Next steps

The rules will come into force on 4 October 2021, and firms and IGCs will have until the end of September 2022 to publish their next report.

What you need to do next

We have also published a joint discussion paper with TPR seeking input from relevant stakeholders around prescribing standardised metrics or benchmarks for our 3 elements of VFM across the pensions market to make it easier to compare different products. We also want to encourage discussions around transparency and the availability of comparison data.

Please review the questions posed in our discussion paper and send us your views using the address [email protected] by 10 December 2021