FCA and TRP issue discussion paper on improving value for money in pensions

The UK’s Financial Conduct Authority (FCA) and The Pensions Regulator (TRP) have issued a joint discussion paper based around building a common framework for measuring value for money (VPM) in defined contribution pension schemes.

Through this, the regulators are hoping to drive long-term focus on VFM in the pensions space.

A defined contribution (DC) pension scheme only maximises the retirement income for savers if the scheme delivers value for money. The regulators define these as well-run schemes that deliver good investment performance that is not eroded by high costs and charges.

To help good value schemes to compete, the regulators have drafted a common framework for disclosing information on the key elements that make a VFM. This includes investment performance, scheme oversight, data quality, communications, costs and charges.

Within the framework, trustees and independent governance committees can compare their scheme’s costs and charges, investment performance and service standards with similar offerings from other providers.

They also stated that disclosures will not be enough to address issues with VFM in pensions Improving data disclosures is a starting point and the regulators will continue to make changes when it can.

TPR executive director for regulatory policy, analysis and advice David Fairs said, “Delivering value for money in pensions is a key priority for TPR – all part of our work to put savers at the heart of what we do. Regulators, industry and others must be able to effectively assess value for money to ensure good pensions outcomes. The discussion paper sets out our ambitions for an industry-wide VFM assessment framework.

“DC savers rely on the pension system working as best as it can over the lifetime of their saving – every penny counts. That’s why independent governance committees and trustees need a framework which provides a holistic assessment of what VFM means – beyond cost and charges – to allow them to hold their providers to account and deliver the best possible outcomes for savers.”

The regulators are asking for comments on the paper by 10 December 2021.

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