Financial Conduct Authority (FCA) head of asset management and pensions policy, Nike Trost, has said that the benefit of the Value for Money (VfM) framework is transparency, which should enable decision-makers to think about if investment return is generated in the "right way".

Speaking on a joint podcast by The Pensions Regulator (TPR), Trost said the VfM framework should drive better competition not just on immediate cost but also allow the industry to think about long-term value.

TPR interim director of policy and public affairs, Patrick Coyne, stated that TPR is not advocating for one asset class over another with this framework, but is instead suggesting all schemes should be able to consider investment in asset classes that could benefit savers.

He said that the best way to do that is through high standards of trusteeship scale and “clear, consistent and transparent data on performance that enables that good decision making”.

In addition to this, Trost said the Department for Work and Pensions and TPR are “very clear” that the ultimate framework must cover the whole sector.

“For consumers, there shouldn't be a difference in what they experience, whether it's in a trust based in contract-based schemes,” she continued.

However, Trost acknowledged that implementing this framework would be expensive, therefore it is important to “get it right” and for it to “drive the right behaviours”.

Indeed, she said the feedback from the industry consultation on the framework included making room for forward-looking metrics so people can showcase when they have made changes to their scheme and making the overall framework proportionate.

Trost explained that making the overall framework proportionate was something the FCA always expected and was “keen” to do.

“And then we also had feedback on the assessment process, if that really reflects how, trustees and others might think about schemes and refining that,” she said.

“I think there's a lot of consensus that in principle this is needed, that there needs to be best transparency, and that there needs to be a greater focus on value.

“I think that that element has been, really supported by the market. You know, people worry that there's too much focus on immediate cost and not enough focus on value words.”

Trost also identified that defining specific metrics was something TPR and the FCA was “still working through with the industry” and said it needs to land on some decisions on this in the “coming months”.

“We need to set out what we want to achieve, the outcomes that we believe savers need to get from really effective system. And then really lessons industry's view about how we get there,” Coyne added.

Additionally, Coyne reiterated that TPR is “still working with government and industry to clarify the final shape of the VfM framework” and it would be a continuation of that approach to put VfM as a “guiding light” through the defined contribution (DC) system.

Trost said that the FCA and TPR would “undertake some further consultation” on the VfM framework to “play back what we've heard and to showcase refinements”.

“And then, of course, we also expect to legislate,” she said.

Coyne stressed that the framework will not work “unless it works across both sides of the market.”

Trost emphasised: “The VfM framework can only be a tool. The whole debate about VfM is about ensuring a mindset shift so that everyone is focused on long-term value for members, not just on immediate cost.

“I think there's been a lot of debate about that in the industry more generally. I think that debate has shifted significantly over the last few years with a huge focus on value.

“And I think a recognition that there needs to be more of a focus on long-term value. And then the framework can give to additional tools.”

Coyne said that the VfM framework was a “good starting point”, but warned that the implementation of the framework is “really important” because it must be conscious of unintended consequences.

“We're going to have to work with industry to look at those cultures and behaviours and what is driving outcomes to make that reality,” he stated.

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