The Value for Money regime is on its way, but with the rulebook still in development, what does the pensions industry make of the government’s latest thinking on this crucial reform?
The Department for Work and Pensions (DWP) published a lengthy consultation on the draft Value for Money (VfM) framework last week. It followed pensions minister Torsten Bell’s announcement that the implementation of the VfM framework would be delayed and subject to a “test” period with only the largest schemes taking part.
In a press release from the DWP, issued alongside the release of its revised regulatory roadmap, Bell said VfM was part of “the biggest pension reforms for a generation”. You can access the consultation via the button below.
“Our task is to level up the quality of the pensions private sector workers receive, towards those in the public sector,” Bell said. “For the first time, we’re making sure savers can see whether they are getting a good deal from the pension they’re saving into.
“We can’t have people working hard to earn the money they save towards retirement, only to have those funds sitting in schemes that aren’t working just as hard on their behalf.”
Implementation changes a ‘pragmatic’ move
Helen Shackelford, partner at LCP, warned that it was “important to strike the right balance between making timely progress and ensuring the framework is sufficiently developed” when it is implemented.
She added: “While it is positive that automatic consequences of the outcomes of assessments will not be applied in the first year, if those results are published, they will still impact providers, schemes and the industry as a whole.
“The government’s broader policy direction is already clearly focused on consolidation, supported by a range of existing initiatives. The VfM framework should focus on transparency and better member outcomes, rather than acting as an additional mechanism to force consolidation.”
Damon Hopkins, head of DC workplace savings at Broadstone, said: “By assessing investment performance, service quality and costs together, the framework should encourage stronger competition based on the value schemes deliver rather than headline charges alone.”
The new timetable was “more pragmatic”, Hopkins said, giving providers and trustees “more time to embed the new requirements effectively and build trust in the framework”.
He added that the main challenge for the government and regulators would be to ensure a robust VfM rulebook with meaningful metrics with which to assess pension schemes, while also remaining proportionate and supporting good outcomes and innovation.
Martin Willis, partner in the corporate DC pensions team at Barnett Waddingham, noted that giving smaller schemes more time to adjust to the VfM regime “recognises that a rushed timetable helps no one – better to get compliance with assessment framework right and allow learnings to be considered”.
“There is now a defined window for both VfM implementation and major industry-wide consolidation by 2029. That’s a lot to deliver in a short timeframe.”
Getting the data right
Anthony Ellis, head of DC trust consulting at Hymans Robertson, highlighted that the latest consultation acknowledged that “different retirement objectives require different measures of success”.
“In particular, it is good to see the proposal to compare retirement-stage strategies against peers with similar decumulation aims,” Ellis said.
He added that a planned central database of performance data “could become a valuable industry resource” but would need to be handled carefully to ensure appropriate usage, high-quality information, and protection of commercially sensitive material.
On the subject of data, Maurice Titley, commercial director for data and dashboards at Lumera, added that the success of the VfM regime would hinge on data and information quality.
“The framework places greater emphasis on transparency, governance, service quality and member outcomes – meaning providers will need to demonstrate value through clean, auditable data rather than simply claim it,” Titley said.
“The real test will be whether these changes make pensions simpler for everyday savers, not just easier for the industry to measure. When people can understand how their pension is performing and feel confident they’re in a scheme delivering good long-term value, they’re more likely to engage with their retirement savings and make better decisions for their future.”
