Background

On 13 July 2026, the DWP published a consultation setting out a “detailed proposed approach” to the new value for money (“VFM”) framework for DC schemes (the “Framework”), along with draft regulations (the “draft VFM regulations”) and draft FCA rules (the “draft COBS rules”).

On 11 August 2026, TPR also published an overview of the Framework for trust-based schemes (“TPR’s overview”) and a technical overview of the VFM digital solution (“TPR’s technical overview” and the “Digital Solution” respectively).

In this response

General comments

We welcome the opportunity to respond to this consultation. We have provided comments on questions which are pertinent to our practice, or which we believe could give rise to difficulties for our clients which include both trust-based and FCA-regulated pension schemes. We have included some general comments below, followed by our responses to specific questions.

We also responded to the joint consultation on detailed proposals for the Framework published in January 2026 (the “January 2026 consultation”), and to the FCA’s consultation published in August 2024 (the “2024 consultation”). We have referred to those responses and consultations where relevant below.

We reiterate our support for the policy aim of ensuring that savers receive optimal value for money regardless of the nature of their pension arrangement, and we recognise the work that has been done to develop the Framework in response to the feedback received so far. Some of our concerns remain, and we would like to highlight the following general comments:

  1. Timing

The phased approach is a helpful change to the initial proposals, and we expect that this will ease some of the pressure on schemes in preparing for the Framework (although please see our comments at question 1 below). It is also useful to see the Government and regulators’ expected timing of the next phases of the policy development in the Government’s updated roadmap. This, together with TPR’s overview and technical overview, will support schemes in their planning for implementation.

This detail and support is welcome, but trustees and providers will still need clarity as soon as possible on the final Framework and specifically what will be required in order to meet the relevant deadlines.

  1. Different “default arrangement” and “arrangement” definitions apply to occupational schemes in different contexts

DC “default arrangements” in trust-based occupational pension schemes are subject to various governance requirements in addition to wider governance obligations. Different definitions of “default arrangement” are used for different requirements. For example, the Occupational Pension Schemes (Charges and Governance) Regulations 2015/879 (the “Charges and Governance Regulations”) contain a definition of default arrangement for the purposes of the charge cap. This definition is modified by the Occupational Pension Schemes (Investment) Regulations 2005/3378 in its application to other obligations, including the requirement to prepare a default arrangement statement of investment principles and the chair’s statement. TPR explains this in more detail in its investment guide for DC schemes (see Appendix 1).

The existing requirements can be difficult to navigate and apply in practice. Although the scope of the obligations referenced above is similar, it is not always easy to identify which arrangements are a default. This complexity is set to increase, with the Framework introducing a further definition of default arrangement for VFM purposes. In addition, the Pension Schemes Act 2026 (“PSA26”) will introduce new requirements for “main scale default arrangements” for auto-enrolment and master trust authorisation purposes under the Pensions Act 2008 and the Pension Schemes Act 2017 respectively, with a separate set of conditions for arrangements to be in scope. As the PSA26 comes into force, it would be useful to have guidance to help schemes to identify which arrangements are subject to which requirements, particularly where terminology is not consistent.

  1. Interaction with chair’s statement requirements

As governance of DC arrangements becomes increasingly complex, we welcome the suggestions in the consultation to reduce duplication and streamline the requirements where possible. The consultation reiterates that the DWP is considering amendments to the existing legislation for chair’s statements to ensure that there is no duplication or overlap with the Framework requirements (paragraph 480). As we mentioned in our response to the January 2026 consultation, while we are pleased this is under consideration, we are concerned that, unless such amendments are proposed and then laid shortly, there will be a period during which both sets of requirements will apply.

As part of the DWP and TPR’s work to develop the Framework for trust-based schemes, we would welcome an update and timeline on proposals for the chair’s statement to reassure trustees that this risk is being addressed.

In terms of how this issue is addressed, we note the proposal that contract-based arrangements subject to the Framework will be excluded from the general requirement to carry out value assessments under COBS 19.5.5R(2). IGCs would continue to be expected to carry out assessments for workplace pension arrangements not subject to the Framework, such as additional arrangements with fewer than 1,000 members. The DWP may be considering a similar approach for trust-based schemes. While we can see the logic for this, we wonder whether applying two parallel value regimes to two different streams of default arrangement will have a negative impact on transparency and ease of use for members and other industry stakeholders who are concerned about value.

  1. “Accidental” default arrangements

In our response to the 2024 consultation, we highlighted that many trust-based schemes have multiple “inadvertent” or accidental default arrangements, created, for example, where changes have been made to self-select funds or members have been moved from one fund to another without their agreement (the DWP has published guidance on this issue in the context of bulk transfers without consent (see paragraphs 52-58)).

We are pleased the DWP agrees that in such cases the receiving arrangement should not automatically be treated as a default arrangement for VFM purposes (paragraphs 72 and 73 of the consultation). However, there are some areas where the draft VFM regulations appear not to accurately reflect the policy intent set out in the consultation. We cannot see that this point is included in the draft VFM regulations.

The definition of “in-scope transferred member arrangement” used in the draft COBS rules appears to achieve the intended aim by including a requirement that the arrangement “materially differs from the other arrangement that the member was invested in under the ceding scheme…”. We support this approach, although we expect there will be some instances in practice where it will not be clear whether the new arrangement is “materially different” and it would be useful to have guidance around that.

It would also be helpful if the same approach could also be applied in relation to the charges cap and additional governance requirements (see our general comment 2 above).

  1. Comparability of data

In our response to the January 2026 consultation, we highlighted our concerns that the data may not be reliable or sufficiently comparable to allow trustees and IGCs to make truly informed decisions on value, particularly without a single supplier to verify the published data and “sense check” providers’ interpretation of the questions and metrics. This concern is based on our experience of co-ordinating a value for money comparison study with a group of IGCs.

TPR’s technical overview sets out that, while the responsibility to submit correct data lies with trustees and IGCs, the Digital Solution aims to reduce inputting errors by carrying out automated checks of the format, completeness, range and consistency and prompting users to address missing or incorrect data. This is helpful to understand, but we urge TPR, the FCA and the DWP to keep the reliability and comparability of data under review.

We also recognise that in-scope arrangements will be ultimately comparing their metrics against an average of the comparator group rather than individual arrangements. However, we still think the Framework should expressly allow trustees and IGCs to apply a (small, reasonable) “tolerance”, perhaps at the rationalisation stage of the assessment, to address the likely lack of direct comparability between their scheme’s data and metrics and that of the comparator group (please also see general comment 7 in relation to stage 3 of the assessment and scope for taking into account employer subsidies).

  1. RAGG ratings

To be rated dark green, arrangements will need to be clearly outperforming most in the comparator group consistently and we note that few arrangements are expected to reach this standard (paragraph 386 of the consultation). Our understanding is that the consistent outperformance would need to be based on a body of VFM data over time, meaning there will be a period where it is not possible for any arrangements to be rated dark green. It would be useful to have guidance around what is meant by “consistent outperformance” and, in particular, the time period that is envisaged for sufficient comparator data to be built up.

  1. Employer subsidies

As we set out in our response to the January 2026 consultation, we support the disclosure of employer subsidies which can have a significant impact on the value to members of an arrangement. While we were in favour of subsidies being fully recognised through the assessment process, we note the proposal that they will be disclosed through narrative explanation (paragraph 208 of the consultation) and will not be used in assessment outcomes (paragraph 243 of the consultation).

It appears to us that the draft VFM regulations may permit (or require) employer subsidies to be taken into account during the assessment process, depending on how the employer subsidy is structured. This can vary. For example, a subsidy may be written into the scheme rules, or in a contractual arrangement with the provider, or be on a less formal or even discretionary basis.

An employer subsidy which is required under the scheme rules may be a special feature or characteristic which trustees or managers must take account of as part of step 3 of the assessment (draft regulation 34(2)(b)). Similarly, trustees or managers may consider there is scope to take employer subsidies into account under draft regulation 34(3), which enables them to determine that the scheme or arrangement is providing value for money based on “other information” if they consider that the metric data does not reasonably reflect the VFM of the scheme or arrangement. In our view, it should always be possible for trustees to take into account an employer subsidy when assessing the value of an arrangement, and it would be appropriate for a subsidy to impact an arrangement’s overall rating as they are generally very valuable for members. However, we do appreciate that it should be clear how an arrangement would be rated were there no subsidy and it should not be possible to use an employer subsidy to mask, for example, a disproportionate or imbalanced charging structure.

  1. Impact of Quality of Service

While we understand that limiting the subjective aspects of the assessment is intended to optimise comparability, preventing quality of service from improving ratings may disincentivise trustees / providers from improving their offering. The services a scheme provides can hugely impact members’ outcomes by, for example, improving engagement and decumulation decisions.

Responses to specific consultation questions

Chapter 2: Scope and Thresholds

Question 1: Do you have any comments on our proposals for phasing?

We support the phased introduction of the Framework, with only the largest schemes required to undertake a full VFM assessment and have their data published by the VFM database in the first year. Our understanding is that few single-employer schemes will meet the proposed membership threshold (ie 50,000 or more active and deferred members). While this means the application of the Framework will be fairly limited in its first year, it will not significantly reduce the administrative burden on schemes. Please see our response to question 2.

Question 2: Do you have any comments on our proposal to limit the first data collection period to 6-months? 

As is recognised in the consultation, the limited data collection period will only impact Quality of Service (“QoS”) metrics, as the costs and charges and investment performance metrics are measured at a point in time. Since the QoS metrics are limited in scope, we expect this will not significantly reduce the data collection and reporting burden in the first year.

We recognise there are other factors that influence the timing of the first data collection period, including the timing of the regulations and COBS rules and changes to existing value assessments. If the DWP and the FCA adopt this proposal in the final Framework, we expect that schemes will be able to accommodate the shorter first collection period for QoS data since service data will typically be reported on a quarterly basis.

Question 3: Do you have any concerns about our proposed exemptions and inclusions?

As the DWP will appreciate, it is important that the scope of the Framework is very clear in the legislation so that the requirements can be applied effectively and without unnecessary complexity. We have some concerns that the proposed exemptions and inclusions in the draft VFM regulations may not be sufficiently clear and/or do not reflect the stated policy intent:

  • We note the intention is for DC elements of hybrid arrangements to remain in scope of the Framework unless excluded on other grounds (paragraphs 59 and 60 of the consultation). In our view, the definition of money purchase benefits in draft regulation 3(1)(a) may not capture “underpin” arrangements where members have a guaranteed minimum benefit calculated under an alternative formula, since the underpin could cause the whole arrangement to count as DB. For example, a member’s DC pot with a GMP underpin would not be in scope of the Framework even if there is likely to be significant “excess” DC benefit after the GMP is secured. In contrast, arrangements with underpins which are ultimately cash in nature (ie those which require an arrangement to be topped up to a certain level) are DC.

See also our comments at question 22 regarding how QoS data is collected for arrangements of hybrid schemes.

  • “In-house” AVC arrangements are intended to be out of scope (paragraph 58 of the consultation) and draft regulation 4(2) provides that “an additional voluntary contribution arrangement set up by the employer is not a VFM arrangement”. We are not clear what AVC arrangements would be “set up by the employer”, since typically AVCs will be a section within the wider occupational pension scheme rather than a separate scheme established by the employer. For the purposes of the Charges and Governance Regulations, an arrangement is not a default arrangement if “it provides no benefits other than benefits attributable to additional voluntary contributions” (see regulation 3(6)(b)). It may be clearer to use the same wording in the draft VFM regulations. While this would result in only “pure” AVC arrangements falling outside scope, this seems more in line with the policy intent.

Please also see our general comments above.

Chapter 4: Investment performance – Forward-looking metrics (FLMs) 

Question 12: Do you agree with the proposed requirements for FLM disclosures and safeguards? Why or why not? 

We note the proposal to remove the external advice requirement. While we acknowledge the perceived issues with this requirement (eg introducing additional cost while offering limited protection against gaming and the potential incentivisation of advisor “shopping”), we still consider that it would be a useful safeguard overall. We would support including it, particularly as in practice this is an area where trustees and IGCs should and will take investment advice in any event.

Chapter 7: Quality of Services

Question 22: Do you agree that the metrics for trust-based and contract-based complaints processes are now comparable? Are there any further steps that we should take?

We have some concerns about how QoS data is collected for arrangements of hybrid schemes. A revised definition of platform is proposed for trust-based arrangements with the intention of allowing schemes to exclude out-of-scope complaints (see paragraph 279 of the consultation). We agree with this policy intention but we are not clear where this is reflected in the draft VFM regulations (see also our general comment 4 above).

We note that the draft COBS rules define platform as “the single administration system used to manage the pension pots of savers, including those of the in-scope arrangement for which data is being disclosed, as far as it relates to the firm’s scheme(s)” (19.12 2.2R(8)). It may be that the similar proposed change for trust-based schemes has not yet been made in the current version of the draft VFM regulations.

In relation to closing complaints, the draft VFM regulations and the draft COBS rules vary in how they define closed complaints. Under the draft COBS rules, a “final response” from a firm can include an offer of redress or remedial action without accepting the complaint. While we appreciate there are differences in how complaints are dealt with between trust-based and contract-based schemes, it would be helpful if the DWP and FCA could explain the different approaches taken here.

Chapter 10: Disclosure Requirements

Question 34: Do you anticipate that a shorter initial data collection period would create any practical or analytical challenges, and if so, how might these be mitigated?

Please see our response to question 2 above.

On a related point, we welcome the proposal to publish an optional template (paragraph 468 of the consultation). It would be useful to see the template as soon as possible (before mid-2027), as it could provide valuable guidance which would assist trustees and IGCs with developing their data collection systems.

Question 35: Do you agree to proceed with data publication in November given the risks identified? How likely are these risks to emerge and what steps could we take to address them effectively?

We agree that there are significant risks with delaying public release of the data while a large number of individuals within firms, IGCs and trustees have access to it. Confidentiality and conflicts obligations will vary between individuals depending on their profession, qualifications, role, terms of engagement or employment, etc, and may not be sufficient or consistent enough to mitigate against the potential for disclosure and misuse of data for commercial advantage. Even if statutory obligations were introduced, we expect there would still be a tension with the commercial reality. We agree with the comment that employee benefits consultants in particular may find it challenging not to incorporate what they know into their actions before the data is formally released.

We also agree that making the data publicly available earlier, without the context of the full VFM assessment, carries risks and could lead to poor decisions by savers or employers. This could be mitigated by ensuring that appropriate health warnings were added to the information on the database.