Industry bodies have urged the government and regulators to conduct further testing of the proposed Value for Money (VFM) Framework before it is formally introduced, warning that rushing its implementation could pose significant risks to pension schemes and savers.

The framework, proposed jointly by the Department for Work and Pensions (DWP), the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR), would require schemes to publish clear data on performance, costs and service quality, alongside a rating system designed to enable easier comparisons between arrangements.

Responding to the consultation, which closed on 8 March 2026, both Aegon UK and the Association of Consulting Actuaries (ACA) argued that the framework should undergo a testing phase before being rolled out publicly.

Aegon UK head of pensions, Kate Smith, said the provider supported the ambition of ensuring workplace savers were enrolled in schemes offering value across investment performance, costs and service quality, but warned that creating an objective framework for a diverse pensions market was proving complex.

Smith noted that the latest consultation introduced several significant changes, including a new market comparator database, the addition of forward-looking investment metrics, and what she described as a “worrying downgrading” of service quality and member engagement measures.

“With so many changes and unknowns, 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 warned.

Under the proposals, schemes would submit large volumes of data to a new central VFM database from March 2028.

The database would generate industry-wide average performance measures, which trustees and independent governance committees would compare against before assigning a red, amber, light green or dark green rating to each default arrangement.

However, Smith cautioned that the database's scale and complexity could pose risks if not thoroughly tested.

“The latest proposals include a new central VFM database, with thousands upon thousands of data items to be input by schemes,” she said.

“We strongly urge the regulators to carry out a feasibility study to test how this will work in practice. Attempting to use it ‘live’ in just two years’ time looks incredibly risky.

"Any inconsistencies or errors in submitted data or underlying calculations could undermine the whole framework.”

She also raised concerns about the introduction of forward-looking investment metrics, warning that the measures could rely on subjective assumptions.

“There is a clear risk of ‘gaming the system’, boosting comparative scores by taking a more optimistic view of future performance,” she stressed.

Previous responses to the consultation had also urged the government and regulators to refine aspects of the proposed framework, warning that measures such as forward-looking investment metrics risked unintended consequences for savers.

Smith added that engagement measures within the service quality component had been reduced to a single metric - the proportion of members who have completed a death benefit nomination form - despite engagement playing a critical role in improving outcomes.

Given these concerns, Aegon UK called for the framework to be run initially as a two-year trial limited to the largest multi-employer default arrangements and large single-employer trust-based schemes.

“This will allow time to make sure it is working as intended, producing fair comparisons, and building trust across the pension industry,” she said, adding that a full public launch could then take place from 2030.

The ACA echoed calls for further testing in its consultation response, suggesting that the framework should be trialled privately before being implemented publicly.

ACA chair, Stewart Hastie, said: “We believe it would be in the interests of all stakeholders to test the framework through a ‘dry run’ in private rather than public data, akin to a thematic review, in order to assist the FCA, TPR and the government in testing the metrics, and to inform a cost/benefit analysis ahead of the full implementation.

“This would also allow teething problems to be ironed out and any surprising results to be considered in order to refine the metrics, if necessary."

Hastie also argued that decumulation arrangements should be incorporated into the framework as soon as practicable.

Meanwhile, ACA DC committee chair, Tess Page, warned that the operational burden of the new regime should not be underestimated.

“As an annual exercise, it will take up a substantial part of a scheme year. We would encourage consideration of the breadth and frequency of the regime and whether all metrics and assessments are needed every year," she said.

However, Page welcomed the move to a four-tier rating system rather than the initial red-amber-green approach.

“This will give clearer distinctions between top performers and those requiring intervention, without risking a cliff-edge situation,” she claimed.

“There is some nuance here in how the ratings will be defined, decided and used, with a number of risks that will need to be carefully managed.”

---