As consultations on value for money close today, pension providers and industry groups are urging the government and the Financial Conduct Authority to ensure value for money rules compare apples with apples and are tested without making data public.

The Department for Work and Pensions and the Financial Conduct Authority have been consulting on proposals to assess value for money in workplace defined contribution schemes until 15 September. Schemes would need to make their assessments public and compare themselves with a range of other DC schemes. Following feedback, the government decided to phase the new requirements in, so that the largest schemes would not face consequences for poor performance but would still have to make their assessments public.  

Several pension commentators have said such a delay will not prevent possible reputational and commercial damage and want a trial run to test the framework.  

Independent Governance Group, a professional trustee firm, said the the first year of the value for money framework should be used to test and improve data quality and comparability, “rather than drawing overly firm conclusions or driving decisions from immature data”. 

Guidance on data and disclosure needs to be clearer, the firm thinks, and recognise issues around historic data, chain-linking and asset allocation given the layered history of some providers and schemes. 

For the framework to work, the assessments must compare like with like, said Louise Davey, head of policy and external affairs.
 

“Data needs to be robust and comparable, while giving trustees sufficient flexibility to reflect differences in investment strategy, risk and retirement objectives. That is particularly important in the early years, when the focus should be on testing the framework and improving the data, rather than allowing immature comparisons to drive potentially significant decisions,” Davey said. 

 

IGG is calling for assessments that include risk, portfolio resilience, ESG integration, decumulation targets and differences in strategy. In addition, it wants a more meaningful evaluation of service quality – saying this should cover issues ranging from member understanding, communications and digital journeys, to targeted support and the ease with which members can act on their options. 

The Investment and Saving Alliance also said there needs to be consistency in how rules are interpreted and data is provided, particularly when VfM assessment start to have a reputational and commercial impact.

  

“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,” said Renny Biggins, head of policy products and long-term savings at TISA.

TISA stressed chain-linking – where the performance of a legacy arrangement is added to that of a receiving scheme – as a barrier to consolidation.

Emma Furlonger, managing director of workplace and retail intermediary at Standard Life, echoed the view that there should be a test phase without public data. 

“In our view, the first year should operate as a genuine dry run, giving schemes, trustees, providers and regulators the opportunity to test data, address inconsistencies and build confidence in the methodology before ratings and assessments are made public,” she said.

Kate Smith, head of pensions at Aegon, worried there could be unintended consequences if the government and FCA go ahead with current proposals. Aegon too is calling for 2028 to be “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,” said Smith. 

 

She wants testing to happen “behind closed doors” with data shared just with regulators, rather than VfM data of master trusts, multi-employer and large single employer schemes being made public from the get-go. 

  

“Just because there won't be regulatory consequences doesn't mean there won't be commercial and reputational damage consequences,” Smith said. 

 

TPT Retirement Solutions even said that comparability is not guaranteed under the current proposals, warning that different schemes could draw different conclusions from similar evidence. It therefore wants a third party to carry out assessments, using a consistent methodology. 

Ruari Grant, head of policy at TPT, said: “Schemes cannot be left to effectively mark their own homework, particularly when considering the current dispersion in member outcomes, and the commercial consequences that will flow from a VfM assessment.”  

TPT also wants more emphasis to be put on realised outcomes, rather than ongoing evaluations, so that poorly performing arrangements cannot reset assessments by changing assumptions or strategic asset allocation. Unlike those calling for less emphasis on investments, it maintains that achieved net investment performance “remains the most objective measure of whether a scheme is delivering value”.  

To ensure the regime is proportionate for DC schemes, the provider is calling for DC chair’s statements to be phased out, arguing that it overlaps with VfM disclosures. 

TPT is one of the providers that welcomes the inclusion of forward-looking metrics, which the government added following industry feedback. Some providers had argued that investment in private markets, which might only produce a return after several years, would be penalised by looking solely at past performance.  

However, others strongly oppose including such assumptions about future performance. "The possible inclusion of 'forward-looking metrics', which are essentially the product of hocus pocus projections and self-marked valuations by asset managers, is deeply worrying,” said Clare Reilly, chief investment solutions officer at PensionBee.  

“Without the right guardrails, it’s all too easy to paint an overly optimistic picture of returns on some pensions, particularly those with exposure to more opaque private markets including asset classes like private equity, where returns may simply never materialise for savers in the way they hope. We don't think forward-looking metrics belong anywhere near a genuine value-for-money assessment, not least because we think there's direct tension with the FCA's own Consumer Duty,” said Reilly.  

As well as opposing the inclusion of forward-looking metrics, PensionBee wants to see scores for different aspects being shown separately in the public assessments.

"Blend everything into one overall score and you risk hiding real problems, including on service. Poor administration has caused genuine harm to savers in the recent past, and a single blended figure could let that get buried under a reasonable investment number. Scores need to be broken out, with service quality, particularly the speed of transfers, given proper prominence,” she argued. “None of this will be entirely comfortable for providers. But if the regulators get this right, it should sharpen competition and lift standards right across the market.”