Significant progress on new Value for Money framework

What you need to know

• The Financial Conduct Authority (FCA) has published a further consultation paper on the new Value for Money framework, for workplace defined contribution (DC) pension schemes. This incorporates industry feedback provided as part of the 2024 consultation.
   
• There are some significant changes to the framework outlined in 2024, including a greater focus on forward-looking metrics, an expanded rating system intended to avoid herding and reward superior performance, and an online central database to disclose VFM data.
   
• The proposed scope remains unchanged from 2024. Exclusions are likely only for very small legacy entities, and certain types of plan (e.g. executive pension plans and small self-administered schemes).
   
• Whilst the consultation continues to be driven by the FCA, the policy intent is for alignment with trust-based schemes and consultation on draft legislation and guidance from the Department of Work and Pensions (DWP) and The Pensions Regulator (TPR) will follow in due course.
   
• Subject to passage of the Pension Schemes Bill and subsequent FCA and DWP/TPR rulemaking, the intention is that VFM requirements for trust‑ and contract‑based schemes come into force together, with first mandatory VFM assessments required in 2028. Regulators will run further consultations, roundtables and stakeholder events before finalising rules and secondary legislation.