The Financial Conduct Authority’s (FCA) latest consultation on the value for money (VfM) framework must focus on proportionate and practical measures if it is to genuinely improve member outcomes, according to LCP.

In a blog by LCP principal, Tim Box, and partner, Lydia Fearn, the firm said the proposals reflected growing regulatory and consumer focus on ensuring pension savings deliver genuine long-term value, particularly as cost pressures meant savers were paying closer attention to how effectively their money worked for them.

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

LCP noted that the framework was intended to move the industry beyond a narrow focus on costs and charges, instead incorporating investment performance and service quality.

This, the firm argued, should help savers better understand how their scheme compares with others and encourage stronger competition between providers.

The latest consultation introduced several notable changes, including a new four-tier grading system that replaced the previous red, amber, green model.

Under the revised approach, two green ratings indicate that value is being delivered; amber signals that value is not currently being achieved but could be improved; and red indicates that value cannot be delivered without more radical action, such as transferring members to another arrangement.

The consultation also proposed greater use of forward-looking metrics alongside historical data, a move LCP said should provide a more meaningful picture of how schemes are expected to perform in the future.

In addition, schemes would no longer be required to benchmark themselves against a selected group of peers; instead, they would compare outcomes against centrally collected market data.

However, LCP noted that details on how such a database would operate remained unclear.

Meanwhile, proposals to streamline the reporting of costs and charges were also welcomed by the firm as a way of reducing compliance burden while maintaining transparency, although LCP highlighted that assessing service quality remained challenging, with regulators initially proposing a limited set of indicators and deferring the introduction of customer satisfaction surveys.

The consultation is set to close on 8 March 2026, with the first mandatory VFM assessments expected to take place in 2028.

LCP warned that this gave schemes a limited time to prepare for the required data, reporting, and governance changes.

While welcoming the direction of travel, the firm cautioned that the framework must remain proportionate and focused on improving member outcomes, rather than becoming a purely administrative exercise.

This echoed broader industry concerns, which welcomed the updated framework while calling for further work to ensure the approach is fair, comparable, and focused on member outcomes.

---