FCA - Value for Money Framework
On 17 October 2024, AREF submitted a response, focussing on investment by pension schemes in real estate assets, to the FCA's consultation, CP24/16: The Value for Money Framework.
The consultation contained proposals for detailed rules and guidance for a new value for money (VFM) framework for savers invested in default arrangements of workplace defined contribution (DC) pension schemes. These proposes include:
- requirements for the consistent measurement and public disclosure of investment performance, costs and service quality by firms for default arrangements of workplace DC pension schemes against metrics the FCA believe allow VFM to be assessed effectively
- the ability for those overseeing and challenging an arrangement’s value – Independent Governance Committees (IGCs) and Governance Advisory Arrangements (GAAs) for contract-based schemes – to assess performance against other arrangements and requires them to do so on a consistent and objective basis
- requirements for public disclosure of assessment outcomes including a 'red, amber, green' (RAG) VFM rating for each arrangement and
- requirements for firms to take specified actions where an arrangement has been assessed as not VFM (red or amber).
While this consultation relates to rules for FCA-regulated firms operating contract-based pensions, they are based on previous work with the Department for Work and Pensions (DWP) and the Pensions Regulator (TPR) (see below) and are designed to be suitable for application across the DC workplace pensions market.
AREF's response was overseen by AREF's Public Policy Committee.
DWP/FCA/TPR - Value for Money: A framework on metrics, standards, and disclosures
On 11 July 2023, the Government published a number of papers in relation to providing better outcomes for pension savers. One of these was the response to the policy consultation on Value for Money: A framework on metrics, standards and disclosures, which was published in January 2023. The consultation and response were jointly published by the Department for Work and Pensions (DWP), Financial Conduct Authority (FCA) and the Pensions Regulator (TPR).
The Government and regulators proposed key metrics, standards and data disclosures for DC pension schemes under the Value for Money (VFM) framework. They also included proposals for the use of this data in comparisons and assessments of value for money.
The VFM framework will be implemented in phases and the Government and regulators will continue to work with industry to ensure that schemes, providers, and employers are as prepared as possible. It will take time to fully implement the VFM framework; primary legislation will be required and there will be further consultations on draft regulations and FCA rules.
AREF responded to the consultation with the assistance of its Public Policy Committee. AREF agreed with Government that delivering value for money doesn’t just mean low costs and charges. The response can be found here.
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