The government has been called on to "go further" in its plans for a value for money framework (VfM), with particular concerns raised around the limited focus on sustainability, and the lack of a link between investment targets and member outcomes.

Responding to the governments consultation on the plans for the framework, which was announced as part of a broader range of measures to support defined contribution (DC) savers, Mercer argued that while this could be a "big step forward", there are some areas of concern.

In particular, the company pointed out that sustainability does not feature strongly, both in the environmental social and governance (ESG) sense and in the sense of the pension scheme continuing to be good quality and supported into the future.

It also argued that the new framework should support and require the delivery of higher quality, member-focused outcomes that represent good value rather than cost in isolation.

In light of this, Mercer partner and UK defined contribution (DC) leader, Gail Philippart, argued that there should be stronger focus on how the investment return targets are delivering targeted good member outcomes and not a simple cash or inflation plus target.

She continued: “We support the idea of a harmonised VfM framework and in particular, how that would give schemes a clear pass or fail.

"This makes it very clear to those governing schemes whether urgent action needs to be taken.

“While comparison with at least three other schemes’ investment returns is being suggested as a possible approach, we support the proposal in not just using investment return league tables. Comparison tables may lead to herding of investment strategies (as we have seen in different countries) and potentially, stifle innovation.

“Disclosure of administration and investment costs separately is a big step forward for transparency, allowing the proper assessment of providers in their role within DC pension provision."

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