The Department for Work and Pensions (DWP) has published its final consultation and draft regulations for the value for money (VFM) framework.

Its policy consultation outlines the objectives, reforms, implementation approach, and proposals for the framework, aiming to drive competition, improve poorly performing arrangements and transparency, and support wider reforms on consolidation and governance.

Under the framework, schemes will be assessed on investment performance, costs and charges, and the quality of their service, receiving a rating ranging from red (poor value) to green (outperforming on value).

The consultation represents the final set of proposals ahead of implementation, building on earlier consultations to ensure the framework is proportionate, effective and deliverable.

The primary changes since the previous consultation include a phased implementation, rather than all in-scope schemes completing the full assessment in the first year of the framework.

In 2028, master trusts, large single-employer trusts, and all firm-designed, open, multi-employer contract-based schemes will complete full VFM assessments and assign ratings, while smaller single-employer trusts, legacy, and bespoke arrangements will only submit data to regulators that will not be published.

From 2029 onwards, all in-scope schemes will be required to complete full disclosure, assessment, ratings, and “face consequences”.

However, these consequences for underperforming schemes, which include compliance notices, fines, or taking steps to wind up, will only take effect from the second assessment cycle onwards, rather than immediately as previously proposed.

Another change was that the initial data collection period will be shorted to July to December 2027.

The DWP also sought views on whether data submitted in March should only be made public in November, after schemes have published their assessment reports, and whether a more tailored approach to arrangements being assessed at different year-to-date points should be adopted.

A new geometric averaging methodology based on representative members’ experience was proposed, instead of the previously proposed arithmetic approach, while the requirements for firms and trustees to obtain third-party advice on forward-looking metrics will be replaced with the mandatory disclosure of underlying assumptions.

The previous consultation proposed that each arrangement should be assessed on an employer cohort level in step one (investment performance) and against minimum, median, and maximum investment performances.

It has now proposed that, as part of the phased implementation of the framework in the first year, the multi-employer cohort tables will not be used for assessments, shared with other providers or made public.

The consultation is open to responses until 1 September 2026.

Alongside the consultation, the government published the draft regulations for the VFM framework, with the final regulations expected to be published with the consultation response by January 2027.

The Pensions Regulator will also consult on any necessary codes of practice and/or guidance, while the Financial Conduct Authority will prepare a policy statement and rules that will published in Q1 2027, outlining the details of implementing the framework for the contract-based market.

---