Industry opinion is divided on the government and regulators’ proposed new value for money (VFM) framework for workplace defined contribution (DC) pensions, according to a poll from Sackers.

The findings, based on a webinar survey of 68 respondents representing trustees and employers of DB schemes, examined views on the joint consultation launched last month by the Department for Work and Pensions (DWP), the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR).

When asked whether they were confident that the new VFM framework would improve member outcomes, responses were fairly evenly split.

A small majority expressed confidence: 5 per cent were very confident, and 52 per cent were fairly confident.

However, 43 per cent said they were not at all confident that the framework would deliver better outcomes for members.

Respondents were also asked whether, based on the current proposals, they believed their own schemes would be assessed as offering value for money.

Here, 19 per cent said they were very confident, 49 per cent fairly confident, 13 per cent not at all confident, while 19 per cent selected ‘other’.

Sackers partner, Andy Lewis, said the results suggested there was still work to do to build broader confidence in the framework.

“The new DC VFM framework is intended to shift focus away from costs and charges to a more holistic assessment of overall value for money. The ultimate goal is to improve member outcomes,” he stated.

“Feedback on the new framework suggests there is still some work to do to persuade both the industry and pension savers that the proposed VFM framework will achieve this.”

Lewis noted that the consultation sets out an extensive range of required metrics for assessing value, some of which could be interpreted in different ways, while other aspects would be inherently difficult to quantify.

“Alongside conducting a rigorous assessment of their VFM, schemes will also have to report transparently on the results and, where applicable, take prompt and specific action if their scheme is not up to scratch,” he continued.

With the first VFM assessments scheduled for 2028, Lewis urged schemes and service providers to begin preparations now to ensure they are well placed to achieve positive ratings.

“The consequences of not providing VFM are significant,” he warned.

“Underperforming arrangements falling into the ‘not value’ amber and red categories will be required to take corrective action or, in some cases, exit the market altogether.

“Early warning of potential assessment outcomes will therefore be vital, as the available timescales for fixing things are likely to be tight. In contrast, for those DC arrangements that do perform well, achieving dark green or green ratings, the framework may provide some external validation.”

Lewis added that while a more rigorous, systemic and transparent framework for assessing overall VFM in DC schemes could be viewed as a positive development, the implementation burden on the industry should not be underestimated.

“In principle, I think we can all accept that a more rigorous, systemic and transparent framework for assessing overall VFM in DC schemes is a positive development,” he said.

"But this will inevitably entail a lot of implementation work for the industry, the cost of which could be significant."

He also cautioned that the framework's technical, data-driven design meant detailed metrics will be critical, warning that there was a risk they could leave limited scope for other important scheme attributes - such as good governance - to be considered, as they were harder to quantify.

“There is a delicate balance to be struck here, and our survey suggests some mixed views on the current proposals,” Lewis concluded.

“As the current consultation moves forward, it could be useful for all of us to keep in mind the challenge of ensuring that the final framework will produce results that are genuinely useful for schemes, employers, the industry and pension savers.

“For the cost and time commitment required from the industry, some people are already asking whether VFM itself runs the risk of not being ‘value for money’.”

The consultation closes on 8 March.

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