Pension providers and industry bodies have called for the first year of the value for money (VFM) framework to be used as a testing period before ratings are made public, warning that inconsistent data and immature comparisons could cause reputational damage and drive 'inappropriate' consolidation.

The calls come ahead of the closure of the latest consultation on the VFM framework, which aims to provide a more consistent assessment of defined contribution (DC) arrangements across investment performance, costs and charges, and service quality.

Under the proposed phased implementation, master trusts, the largest single-employer trusts and open firm-designed multi-employer defaults would submit VFM data, carry out assessments, assign ratings and publish the results in 2028, although poor-value ratings would not initially trigger regulatory consequences.

However, Aegon warned that the absence of formal regulatory consequences would not prevent commercial and reputational effects if early ratings were published before the framework had been fully tested.

It called for 2028 to become a “true test” year, with assessments carried out behind closed doors and ratings shared only with regulators.

Aegon head of pensions, Kate Smith, said: “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.”

She argued that inconsistent interpretations of input data and assessment methodologies could distort comparisons, particularly during the framework’s first year.

“A more proportionate approach in the framework's first year would be for these schemes to carry out their assessments behind closed doors, with data and ratings shared only with the regulators,” Smith added.

“This would give the pension industry and regulators the opportunity to test the process, take any learnings and make improvements.”

Aegon also called for closed default arrangements that will not carry out assessments until 2029 to be exempt from submitting data in 2028, arguing that this would reduce pressure on the new online system and allow providers to focus on consolidating poor-value arrangements.

Sackers partner, Helen Ball, also welcomed the move towards a more consistent approach to assessing value across the DC market, particularly the phased implementation timetable, but warned that trustees and independent governance committees (IGC) still lacked the full picture on how the regime would operate.

She noted that final regulations are due in January, with a separate consultation on The Pensions Regulator’s Code of Practice expected in the first half of 2027, arguing that greater clarity was needed as soon as possible to allow schemes to prepare and plan resources.

“In particular, we need details that would help schemes to identify and assess which arrangements are in scope, confirmation of which overlapping reporting obligations will be removed, and an explanation of how employer subsidies might impact in some way the assessment process,” Ball noted.

“Greater clarity will help trustees and IGCs apply the framework consistently and deliver its ultimate underlying objective of improving outcomes for members.”

Meanwhile, TISA echoed the call to delay public disclosure until schemes apply common methodologies and assumptions consistently.

TISA head of policy, products and long-term savings, Renny Biggins, said: “The VFM framework has the potential to improve outcomes for millions of pension savers.

“Whilst we support the objectives and phased approach for implementation, the framework will only deliver if there is meaningful comparison between schemes.”

He added that consistency would become particularly important once ratings began creating reputational and commercial consequences, arguing that the implementation period should be used to establish an industry-wide approach before results are made public.

TISA also raised concerns about proposed chain-linking requirements, warning that these could distort the performance of receiving arrangements and discourage consolidation.

It called for simpler disclosure of costs and charges and stronger ongoing governance to identify unintended consequences as the market evolves.

IGG similarly supported a transitional first year, warning that “immature comparisons” should not be allowed to drive potentially significant scheme decisions.

It also argued that the proposed service-quality measures remained too limited and should better capture members' understanding, confidence, communication, digital journeys, and the ability to act on retirement options.

IGG trustee director and head of policy and external affairs, Louise Davey, commented: “For the framework to work, we need to make sure we are comparing like with like.

“Data needs to be robust and comparable, while giving trustees sufficient flexibility to reflect differences in investment strategy, risk and retirement objectives.”

She added that VFM extended “well beyond investment performance and charges”, with member service and understanding also fundamental to good outcomes.

Also responding to the consultation, the Society of Pension Professionals (SPP) broadly backed the framework and phased implementation but called for greater clarity on its scope, including its treatment of additional voluntary contributions, hybrid schemes, single-employer trusts, and future coverage of non-workplace, decumulation, and collective defined contribution arrangements.

The SPP also stressed that historic investment performance should carry greater weight than forward-looking metrics, suggesting projections should account for no more than around 30 per cent of the assessment.

SPP Financial Services Regulation Committee chair, Dr Amanda Cooke, said: “VFM should not become a box-ticking exercise or drive schemes towards a one-size-fits-all approach.

“The framework needs to recognise different scheme structures, member needs and retirement strategies, while ensuring that the costs of compliance remain proportionate to the value it delivers.”

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