TPR and FCA confirm development of common VFM measurements

The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have confirmed plans to develop common measurements to help compare the value for money (VFM) of defined contribution (DC) pension schemes.

The proposed common approach across the industry aims to allow access to consistent data on investment performance, costs and charges, and service standards.

The regulators hope that the measurements will allow both industry professionals and pension savers to better compare DC schemes so they can see which offers better VFM.

Over time, this increased transparency should improve competition, which will encourage schemes to improve the value they provide and help deliver more secure retirements for savers, according to the regulators.

TPR and the FCA launched a discussion paper last year to establish how best to measure VFM, with the regulators noting that it was “hard” to consistently compare fees and charges, investment performance and quality of service, making it hard to gauge whether savers are receiving value for money.

They added that responses to the paper demonstrated “clear support” from across the industry for a consistent approach to the issue.

However, the regulators noted that further work was needed on what should be disclosed and how, as respondents also highlighted complex questions about how to achieve the common metrics.

They will continue to engage with the industry and consumer groups over the coming months on the disclosures and measurements.

TPR, the FCA and the Department for Work and Pensions will work together to publish a consultation “towards the end of 2022”, setting out the proposals.

Commenting on the announcement, Pensions Minister, Guy Opperman, said: “Ensuring value for money for the record number of Brits now saving for retirement is one of my key priorities.

“While cost continues to dominate decision-making, this does not always lead to the best member outcomes. We want those making choices about where people save their money to take into account more than just price, and I look forward to progressing this work alongside TPR, the FCA and industry.”

TPR executive director for regulatory policy, analysis and advice, David Fairs, added: “We and the FCA are determined to drive a long-term focus on value for money across the pensions sector and welcome the depth and breadth of responses to our discussion paper on a common framework.

"Particularly welcome is the broad consensus from industry that we need a better assessment of value for money to deliver stronger outcomes for savers in areas such as costs and charges and investment performance. But we acknowledge this is a complex area and there were many views on our proposals which need further consideration."

FCA executive director for markets, Sarah Pritchard, said: “Consumers should be able to have confidence that their pension is delivering value for money.

“The changes we and TPR propose will help achieve this – and over the long term, help deliver a more secure retirement for pension savers. We will continue working with industry over the coming months to make sure we get this right.”

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