Background

On 8 January 2026, the FCA, the DWP and TPR published a joint consultation on detailed proposals for the new value for money (“VFM”) framework for DC schemes (the “Framework”). TPR has also published an overview of the Framework and specific aspects of the consultation for trust-based DC schemes (the “TPR overview”).

In this response

Responses to specific consultation questions and related 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. Our general comments appear below, followed by our responses to specific questions.

General comments

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. It is clear that, following the FCA’s 2024 consultation, a great deal of work has gone into developing the Framework to address many of the points that we and others in the industry raised in that consultation. Some of our concerns remain, and we would like to highlight the following general comments:

  • Timing

As the FCA, the DWP and TPR will appreciate, the Framework represents a significant new administrative burden, requiring pension schemes and providers to develop systems to collect and process data and carry out the VFM assessments. While we would expect the level of work required of trustees and providers to decrease over future years as the Framework beds in, there will be a significant amount of initial “heavy lifting” to set up the necessary systems and processes. If the first assessments are to be published in 2028 based on data at the end of 2027, we would expect schemes and providers will need to begin developing these systems in the coming months. This means trustees and providers will need clarity as soon as possible on specifically what will be required, especially in relation to data and metrics.

The proposed scope of the Framework is broad (see our comments at question 1 below). It will capture many schemes and arrangements at the smaller end of the market, particularly since the 2028 target comes ahead of the planned 2030 timing for most DC providers / master trusts to reach new default arrangement scale requirements. These smaller schemes may find it particularly difficult to apply the resource needed for compliance with the Framework within the suggested timeframe. We would encourage the parties to ensure their engagement with industry about the practicalities of gathering data over the course of 2027 includes trustees and providers of all types of arrangements in the market which will be in scope for VFM, including smaller and single employer schemes as well as investment consultants and administrators.

  • Comparability of data

As we highlighted in our response to the FCA’s 2024 consultation, we have co-ordinated a value for money comparison study with IGCs since 2017. There are a number of similarities with the Framework, and we wanted to reiterate some key insights we have gained through this work. In our experience, no matter how closed the data point request is, even in the more “quantitative” style questions relating to investments and charges etc, respondents have invariably answered it in different ways. This raises questions about whether the data is comparable and sufficiently reliable to formulate their assessments and has resulted in a need for follow up with the firm(s) in question to check their understanding.

The proposed Framework will not have a single supplier to verify the data that firms and trustees publish. We have a real concern that, particularly in the early years, the data may not be reliable or sufficiently comparable to allow trustees and IGCs to make truly informed decisions on value. This concern is particularly acute given the proposed impact of a “not value” rating (see question 40 below).

Whilst we recognise that in-scope arrangements will be ultimately comparing their metrics against the “average” of the commercial market comparator group rather than individual arrangements, we nonetheless think the Framework should expressly allow trustees and IGCs to apply a (small, reasonable) “tolerance” for the risk of lack of direct comparability between data and metrics when carrying out their VFM assessments and assigning a final VFM rating, perhaps at the rationalisation stage of the assessment (please also see our response to question 25).

  • Interaction with chair’s statement requirements

We welcome the fact that the DWP is considering amendments to the existing legislation for chair’s statements to address duplication with the requirements of the Framework. However, unless such amendments are proposed shortly, we are concerned that there may be a period after the Framework is introduced where trustees are required to repeat similar work on VFM / disclosure of various metrics over different reporting periods and with different assessments.

There also appears to be the strange result that some schemes may be required to continue carrying out old-style value assessments within the chair’s statement for arrangements that are not in scope of the Framework, whilst applying and disclosing full VFM assessments for arrangements which are in scope of the Framework. Applying two parallel value regimes to two different streams of default arrangement, each of which works in very different ways, will not assist with transparency and ease of use for members and other industry stakeholders who are concerned about value. Nor will requiring schemes, potentially, to disclose public assessments of value in two separate places – under the chair’s statement for out-of-scope arrangements and under the Framework disclosures for in-scope arrangements.

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 these duplication, overlap and transparency risks are being addressed and that appropriate measures will be introduced before the Framework needs to be implemented.

Specific consultation questions

Question 1: Do you have any comments on the proposed scope? Do you believe any further exemptions should be considered?

In our response to the 2024 consultation, we highlighted that many trust-based schemes have multiple “inadvertent” 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. If the intention is that these arrangements would be in scope of the Framework (eg where they have at least 1,000 members), we consider this will create a disproportionate burden on schemes and that these arrangements should not be the intended focus.

We urge the parties to consider including only “true defaults” in scope, at least initially, and leave such “inadvertent defaults” and quasi-defaults to a later phase. We understand the policy aim of targeting arrangements where members “are most likely to be disengaged and therefore at greater risk of receiving poor value”, but we query whether including “inadvertent” default arrangements furthers this aim in a proportionate way. Many such arrangements are made up of engaged members – ie those who have self-selected investments but changes to the investments result in the arrangement being treated as a default. The policy aim must be balanced against the administrative burden of the Framework and the wider context of other policy changes in the DC market, including the scale requirements from 2030 which are expected to drive consolidation into main scale default arrangements (please also see our general comments above).

A more targeted scope, excluding inadvertent defaults and quasi-default arrangements, could help make implementation of the Framework more feasible while still supporting the policy aim of reaching the members at greatest risk (see also our comments at question 4 about extending the scope to non-defaults). The scope could be expanded in the future once the industry has started to bed in systems for compliance with the Framework, which may ease the initial burden for the next phase of arrangements.

Question 3: We do not think this situation would arise for trust-based schemes. Do you agree with this understanding?

We agree that the issue of members who cannot be linked to an employer is likely to arise differently in trust-based schemes. This may be on a smaller scale where historic data records are incomplete. In line with our response to question 1 about reducing the scope of the Framework, we do not consider that there should be any additional measures introduced to expand the scope for trust-based schemes to cover such orphan members.

Question 4: Do you agree with this proposal for transferred members? Why or why not?

We appreciate the policy intent behind including “in scope transferred member arrangements” in the list of arrangements to which the Framework applies. We agree it will be important to prevent workplace savers being moved out of scope of VFM without their consent. However, the definition should be carefully drafted to ensure that this does not inadvertently bring other arrangements into scope simply because the contractual override in the Pension Schemes Bill is used to make a transfer without consent. Such a transfer could be used for other purposes not related to the Framework – for example, to consolidate pension arrangements. In that situation, it would be important to ensure that self-select funds (where investments remain the same pre and post transfer) are not brought within the scope of VFM.

Please see our comments about scope at question 1 above.

Question 5: Do you agree with our proposed exemptions for contract-based arrangements? Why or why not?

As a general comment, we agree it is proportionate to exclude schemes in winding-up, or arrangements in the process of being closed.

Question 7: Do you agree with our proposed disclosures to facilitate comparisons between multi-employer arrangements with variable charges? Why or why not?

We support the proposals to facilitate these comparisons, since value could vary significantly within multi-employer arrangements where there are variable charges. We also acknowledge the need to balance the data disclosures against schemes’ commercial considerations. In line with our general comments above, this is a particularly complex area where the detail of the disclosures should be finalised as soon as possible so that systems can be developed to collect the data.

Bundled services

We note the revised approach to unbundling the costs for arrangements which have vertically integrated investment and other services, whereby arrangements will be required to show a split between their investment costs and service charges for the most recent calendar year only and the split only needs to be estimated on a reasonable basis. We appreciate that this is an area that the FCA will keep under review over the medium term, but we wanted to highlight our expectation that this split may still be difficult for schemes to calculate or estimate. Restricting the time periods over which the split data has to be provided may not significantly reduce the complexity involved.

We are supportive of not prescribing how the split must be calculated but note the risk that this will lead to inconsistent approaches between schemes.

Question 13: Do you agree with the proposed FLM disclosures and the use of own assumptions? Why or why not?

We understand the potential benefits of including FLMs in the Framework and how these could help demonstrate that an arrangement’s value is improving, provided FLMs are given appropriate weighting which may change over time as the body of VFM data is built (see our response to question 15).

Question 14: Do you agree with the proposed requirement to obtain and consider external advice? Why or why not?

We believe the requirement for third party advice is a sensible and practical suggested guardrail. As noted in the consultation, this is consistent with other requirements for workplace pensions and should help to ensure that any bespoke assumptions are reasonable. However, we query whether the requirement for advisers to have “appropriate skills and experience” should be strengthened further to help ensure an appropriate degree of independence from the scheme’s FLM decision-makers.

Question 15: Are the proposed guardrails sufficient to reduce the risk of gaming and ensure the FLMs disclosed are credible for use in the assessment process? If not, what alternatives/additions would you propose?

We agree that it is essential to include guardrails to protect against FLMs being used inappropriately. In our view an important guardrail will be that backward looking metrics are used to assess the accuracy of FLMs and we welcome the FCA’s proposed use of this in supervisory engagement. However, until there is a body of data showing the difference between FLMs and actual investment performance, it may be appropriate to place less weight on FLMs as a measure of value, eg for the first few years of the new Framework.

Please also see our response to question 14 regarding the external advice requirement.

Question 17: Do you agree with our proposals for disclosing employer subsidies? Why or why not?

Employer subsidies can fundamentally affect the value proposition of an arrangement for the relevant employee cohort and it is important that this can be fully recognised through the assessment process and at least at the rationalisation stage. We are not clear what is meant by the proposal that they “will not form part of the assessment outcome itself” but if the intention is that employer subsidies should be disregarded, we query the rationale for this. If an employer subsidy is materially contributing to the value of an arrangement, it would seem logical for that to be taken into account. If that subsidy was subsequently amended or removed, that would have a knock-on effect on the value assessment of the arrangement going forward.

Question 19: We would like to include “Payments out as retirement income” as a key transaction. We are aware that some individuals approaching retirement may request payment at a future date, hence our request for data based on requests for immediate payment. We would be interested in views on whether our proposed measure above would provide a reasonable measure.

The suggested approach appears reasonable, provided it is practical and cost-effective for administrators to obtain the relevant information. We expect that this measure in particular would need to be kept under review as policies including guided retirement and targeted support develop, to ensure it continues to achieve the intended aim (for example if there are significant shifts in the way members take their benefits at retirement).

Question 20: We would be interested in views on whether the payment of Pension Commencement Lump Sums should be a transaction included in this section.

Yes, we think this is a useful measure to include. We note that member behaviour in relation to requesting PCLSs and retirement income generally can be sensitive to policy changes (for example the recent tax changes to remove the lifetime allowance and recent Government Budgets). This can cause a significant increase (or decrease) in the number of transaction requests that schemes receive for reasons beyond their control, potentially impacting service levels. It would be helpful to have an easement so that any such anomalies would not disproportionately affect an arrangement’s value rating.

Question 22: We would be interested in views on whether our proposed approach to negative perception metrics will provide relevant data to indicate saver concerns.

We remain concerned that negative perception metrics will be misleading and will not be an appropriate measure of value. There are many subjective elements, including the potential differences in what each service provider counts as a “complaint”, and whether the complaints which are in scope are warranted. In addition, the number of complaints cannot give an accurate picture of the quality of service the scheme provides. For example, one scheme could have several serial complainers bringing complaints which are without merit, while another could close complaints (even those with merit) promptly. Similarly, escalation to the Ombudsman does not necessarily mean that a complaint is valid or will be upheld. We consider that this is a less helpful metric and it could be removed to reduce some of the administrative burden the Framework will place on schemes.

Question 23: Does our revised approach to engagement metrics seem appropriate? Additionally, we would be grateful if you could provide us with an explanation of what surveys/data gathering exercises you currently undertake for member engagement. If you would be willing to share a copy of your member engagement survey(s) with us, please tell us.

We support the decision to remove the customer satisfaction survey from the Framework at launch.

Question 24: We welcome feedback on our revised proposals for engagement metrics and how that engagement generates specific outcomes.

We query whether engagement can be usefully measured in a way that helps assess value, particularly since the Framework will apply to default arrangements which by their nature will contain the less engaged members. We do not consider that completed beneficiary nominations are a reliable proxy for member engagement or that this data would be cost-effective to collect. We would support leaving out member engagement metrics entirely in the initial phase of the Framework, with the possibility of revisiting this in the future (see our general comments above in relation to the administrative burden that schemes will face in complying with the Framework).

Question 25: Do you agree with our proposal for comparisons against a commercial market comparator group and the criteria for it? Why or why not?

It would be helpful to have more detail about how the comparator group will be constructed. Will it be automatically generated by the central data repository and made up of all of the arrangements which are identified by the repository as meeting the relevant criteria? If not, what other selection criteria will be applied? How will the selection criteria be decided and reviewed from time to time, and by whom?

It is not always possible legally or in practice for members to be moved in bulk without consent from their existing pension scheme to a large master trust or contract-based arrangement. Although market practice is shifting, in our experience it can still be the case that smaller schemes are not commercially viable to larger providers, or single employer trust-based schemes may have benefit structures (for example hybrid DC and DB benefits or with-profits arrangements) which make transfers more complicated. We support having a broad comparator group, but we consider that single employer trust schemes should be able to measure value against arrangements in other single employer trust schemes in addition to commercial market comparators.

Question 33: What is your preferred proposed approach to step 1: option 1 or 2? Why?

We would like to make a comment about the proposed process for reaching an overall provisional rating of the whole arrangement at the end of step 1. We understand the importance of assessing value in relation to different YTR cohorts. However, we query the proposal that there should be a rebuttable presumption that the arrangement overall is not value where one YTR cohort is found to be provisionally not value. IGCs and trustees would then need to justify why the whole arrangement can be provisionally value. Since this could apply very widely, we suggest it may be more proportionate for the rebuttable presumption to apply only if a materiality threshold is reached, for example only where the findings for cohorts representing a certain percentage of the arrangement’s overall membership are provisionally not value.

Question 35: Do you agree with the proposed approach to considering service value in step 2? Why or why not?

We are aware of differing views as to how the service value can be measured and taken into account. Some schemes place an emphasis on excellent service that is highly valued by their members. But, as the consultation demonstrates, it is very difficult to measure service value in a way that would allow effective comparisons across different arrangements, especially using metrics based on agreed service levels which are likely to vary from scheme to scheme. For that reason, we support limiting the metrics and data collection and reporting required in this area.

However, to the extent service metrics are used, we have reservations about the proposal that these can only be used to downgrade a rating rather than upgrade a rating at step 2. Please see our comments at question 36 below in relation to taking service quality into account at the rationalisation stage.

Question 36: Do you agree with the proposed approach to considering overall value in step 3 and rationalisation? Why or why not?

The rationalisation stage is an important step to allow trustees and IGCs to take into account the particular characteristics and nuances of their arrangements. In our view, if service metrics cannot be used to upgrade the rating at step 2, this stage should allow scope for taking account of overall service quality before deciding the final value rating, as long as reasonable justifications are provided. We also think that employer subsidies should be taken into account at this stage (see also our comment at question 17).

Question 37: Do you agree with the proposed updated RAGG ratings? Why or why not?

Although the additional “dark green” rating adds some helpful nuance to the rating system, our concern is that the ratings could become less meaningful if amber ratings are rarely given in practice (see our comments at question 40).

Question 38: Overall, do you agree with the assessment process we have outlined above? Why or why not? What changes would you propose?

Bespoke arrangements

In relation to bespoke arrangements designed by a particular employer, we question whether a simpler assessment process is appropriate. In our experience, a great deal of thought is given to how a bespoke arrangement fits with the employees’ specific demographics and the employer’s wider benefit provision, etc. The proposed simpler assessment could result in unjustified amber or red ratings if the initial screen does not properly reflect the particular features which may be highly valued by members and employers. There is a risk that a simpler assessment process in fact increases administrative burden in the longer run by requiring employers and IGCs or trustees to go through additional steps to conclude the assessment.

We would welcome additional information on what the assessment process for bespoke arrangements in trust-based schemes will be, noting the comment that this will likely be different given trustees’ fiduciary duty.

Question 39: Do you agree with the proposed transfer requirements for red rated arrangements? Why or why not?

We think this is reasonable and, for trust-based schemes, likely to be in line with trustees’ existing fiduciary duty.

Question 40: Do you agree with the actions proposed for not value arrangements? Why or why not?

We remain concerned about the approach to and consequences of an amber rating (ie preventing schemes from taking on new business in relation to that in-scope arrangement and informing participating employers).

Commercial market pressures could mean that the arrangement, and potentially the wider scheme and associated service providers, would lose significant business due to reputational damage, making an amber rating essentially equivalent to a red rating. In a single employer trust-based scheme, an “amber” restriction on taking on a new employer entity within the employer’s group could result in some cohorts of employees being forced into an alternative scheme or arrangement, and could inhibit legitimate corporate transactional and restructuring activity.

In our view there is a risk that, in practice, these consequences would seriously deter an IGC or trustee from giving their provider’s in-scope arrangements an amber rating. An alternative could be to allow amber arrangements a period of time (eg two years) to implement the required improvement plan and reach a green value rating, before needing to close to new business (say in the third year). Thereafter, a “red” rating would apply. This could encourage amber-rated arrangements which are genuinely in a position to improve value to do so quickly.

We understand that it is proposed under the Pension Schemes Bill that amber and red rated arrangements are closed to new employers from the date of publication of the VFM assessment. Has any consideration been given to what should happen if a new employer wishes to join an arrangement during the assessment process but prior to publication of the VFM assessment? It would seem contrary to the policy aim (and other duties of IGCs and trustees) if new employers could join an arrangement that is about to be rated “red”. We expect there could also be significant disruption if an employer is in the process of onboarding into an arrangement but is then prohibited from doing so by a last-minute amber rating.

We note that improvement plans for amber rated arrangements would be due within one month. This is a short period and may result in many of the plans submitted as “unagreed”. We would suggest a period of up to six months would be more realistic.

Question 42: Do you agree with our proposals for the central VFM database? Why or why not?

Yes, on the basis that we understand the proposed central VFM database may be more workable in practice to enable trustees and IGCs to compare data than the original proposal to have Framework data published on a freely accessible website, which would have involved each trustee board and IGC having to locate the relevant information from numerous sources. However, we query whether a database is feasible within the proposed timeframe for the Framework to come into force? Please see our general comments above in relation to timing.

Question 43: When in the VFM cycle should VFM data be made publicly available and why? For example, should data be made publicly available in March or in October alongside assessments?

We can see the benefit of making data publicly available at the point that the assessment is available, to help interpret the data. However, we expect this would be most useful once the Framework has been in place for several years, so that there is a body of data to enable more meaningful analysis.

We can also see the benefit of publishing the data earlier in March for benefit consultants, and schemes and employers who are currently looking at changing their pension arrangements. However, making the data available at that point without the context of the assessment and any resulting clarity about the arrangement’s final VFM rating may make it difficult to interpret and act upon.

Question 44: Do you have any comments on the suggestion that firm / IGC or trustees should also add a link to the final VFM assessment report on to the proposed central VFM database?

We think this would be helpful to contextualise the metrics.