Industry figures have welcomed the publication of a new joint consultation on the value for money (VfM) framework, while calling for further work to ensure the approach is fair, comparable, and focused on member outcomes.

The consultation, launched jointly by the Department for Work and Pensions (DWP), the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR), proposed that schemes publish “clear data” on performance, costs and service quality, and introduces a colour rating system intended to make comparisons easier and drive action where schemes are delivering poor value.

The Association of British Insurers (ABI) said the framework would play a central role in what it described as a “transformative year” for pensions in 2026.

Praising the updated proposals, ABI senior policy adviser for long-term savings, Ben Infield, argued that assessing workplace defined contribution (DC) schemes on overall value rather than cost alone would support better employer decision-making and outcomes for savers.

“We’re pleased to see the regulators and government have listened to industry and included provisions for a more nuanced approach on scoring assessments as well as a reduced set of data requirements,” he continued.

“The inclusion of forward-looking metrics is also vital, to ensure schemes aren’t penalised for investing in global and UK private markets where long-term investment can deliver greater value over time.”

Pension providers also welcomed changes to the proposed ratings system but warned of operational and structural risks.

Aegon UK pensions director, Steven Cameron, described the move from a simple red, amber, green model to a four-tier approach with light and dark green ratings as "a positive step".

“We had particular concerns over the commercial cliff edge between green and amber-rated arrangements under the previous proposals,” he noted.

“We welcome the move to a four-rating system, but the implications will need to be thought through carefully to avoid unintended consequences.”

Cameron also highlighted the introduction of a centralised database of market averages, saying the “stakes are high” in ensuring the data is fair and meaningful, and warned that greater flexibility around forward-looking performance assumptions could reduce comparability.

He added that the timetable for implementation remained challenging, particularly alongside reforms in the Pension Schemes Bill, and reiterated calls for the FCA to urgently progress its promised consultation on contractual override.

TPT Retirement Solutions DC director, Philip Smith, described the consultation as the product of “years of hard work” across government, regulators and industry.

While consolidation was a key theme in the DC market, Smith cautioned that scale alone was not a guarantee of better outcomes.

“VfM is the vital tool to hold schemes to account, so that members benefit from effective scale, driving greater efficiency, governance and innovation,” he stressed.

Smith added that he hoped the framework would eventually be extended to assess the quality of guided retirement solutions as the DC generation approaches decumulation.

Echoing this, LCP co-head of pensions consolidation, Lydia Fearn, said the consultation constructively built on earlier proposals and responded to industry feedback.

She also welcomed the introduction of forward-looking return assessments and the refinement of the red-amber-green system.

“It is encouraging that the consultation recognises the need for the framework to evolve over time,” she said.

“That will be essential to ensure it remains relevant, proportionate and focused on delivering good member outcomes.”

Service quality metrics emerged as another key area requiring further work.

Broadstone head of policy, David Brooks, welcomed the FCA’s efforts to streamline service quality measures but warned that defining “good service” would be challenging.

“The consultation makes clear that service quality must sit alongside performance and cost, but it stops short of defining a final metric set, leaving the industry to help shape it,” he noted.

“A credible approach requires objective, measurable indicators rather than vague notions of ‘good administration’.”

With this in mind, Brooks suggested a framework built around four core areas: operational accuracy; timeliness of key processes; complaint handling; and member experience, including the clarity of communications and effectiveness of digital tools.

He added that to enable meaningful comparison, service metrics should be standardised, publicly disclosed and benchmarked across the market.

Meanwhile, Rathbones senior financial planner, Kirsten Pettigrew, claimed that the proposals could help tackle widespread inertia among workplace pension savers.

“Auto-enrolment has been one of the UK’s greatest success stories, but there remains a significant knowledge gap around what ‘good’ looks like,” she explained.

“Colour-coded value assessments are a novel and potentially effective way to make pensions information more accessible, but the key question is how value is defined.

"Since apples-to-apples comparisons aren’t always possible, the metrics must be robust enough to separate the wheat from the chaff,” Pettigrew urged.

She added that regulatory reform must be accompanied by improved financial education to help individuals make informed retirement decisions.

The VfM consultation is open until 8 March 2026, with final rules to be confirmed once responses have been considered and subject to the Pension Schemes Bill receiving royal assent.

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