The latest consultation on the Value for Money (VFM) Framework for workplace pensions closed in early March 2026. It covers both workplace contract- and trust-based default arrangements and was published as a joint consultation paper between the FCA and The Pensions Regulator (TPR).
Alongside setting out draft FCA rules, TPR will use feedback received to help shape future regulations for trust-based schemes once the Pension Schemes Bill is passed.
In this article, I’ll recap the framework’s objectives, highlight key proposals from the latest consultation and explore what these – alongside other Pension Schemes Bill initiatives – could mean for you and the wider workplace pensions market.
What the Value for Money Framework aims to achieve
The VFM Framework is designed to make sure that members of workplace pension schemes are receiving good value for their savings.
Rather than focusing too narrowly on low charges, the framework takes a broader view – assessing value across investment performance, costs and charges, and quality of services provided to members.
The Government hopes this more holistic approach will better support long-term outcomes for pension savers, while also encouraging greater investment in the UK – including in private assets, in line with the Mansion House Accord voluntary commitments. However, coming up with an objective framework covering all these components, across a very diverse workplace pension landscape, is proving fiendishly complex.
How the Value for Money Framework is evolving
It’s been good to see the regulators, under the leadership of the FCA, being open to feedback and making changes after previous consultations. That said, the latest consultation introduces some brand new (and very significant) elements that need careful analysis.
These include a market comparator database, designed to gather huge volumes of data and produce benchmark averages for Independent Governance Committees (IGCs) and trustees to assess their default arrangements against when arriving at a rating.
The proposals also introduce forward-looking investment metrics which will now feature alongside historic performance. The intention here is to avoid discouraging schemes from investing in the likes of private assets for fear of short-term under-performance making them compare unfavourably with those following more traditional investment strategies.
Under the latest proposals, VFM ratings would be driven primarily by investment performance, with costs and charges playing a secondary role. Measures of quality of services (including member engagement) would feature to a much more limited extent.
Since originally proposed four years ago, there have been other Government and regulatory interventions, so the framework no longer stands alone. The Pension Schemes Bill will, with limited exemptions, require multi-employer DC schemes to have a main scale default arrangement of at least £25 billion by 2030. This is expected to drive substantial scheme consolidation, supported in the contract-based world by the forthcoming contractual override provisions.
What’s more, the Mansion House Compact and Accord mean many schemes are voluntarily committing to greater investment in private assets, including in the UK – provided they’re in the best interest of members.
Given the scale of these new proposals, and with other major changes to workplace pensions to come as we approach 2030, we believe there should be a two-year trial period involving the largest default arrangements before the framework is fully implemented. The trial could start in 2028 as currently proposed, with the framework going fully live across all remaining default arrangements from 2030.
A central Value for Money Framework database: potential benefits and risks
In previous consultations, IGCs and trustees were to pick three other arrangements to compare themselves against. The introduction of a central database removes the risk of self-selection and, in principle, could support more objective comparisons across the market. However, we have several concerns.
It’s important that the database is thoroughly tested, using live data at scale, before being used in practice. Without a feasibility study, it’s very hard for industry or regulators to assess the risks of things going wrong – be it with inconsistent data entries, skewed averages or unfair comparisons between different scheme types. If flaws in the system lead to schemes receiving a ‘Red’ or ‘Amber’ rating it could mean closing to new employers, bringing commercial risks.
Under the current proposals, schemes would be required to input end-2027 data in March 2028 into the new database, with comparator outputs produced a month later. Two years is an incredibly ambitious timeline for an industry-wide government IT project. It’s worth bearing in mind that this is designed to work across all workplace DC schemes – from large digitally enabled multi-employer arrangements, to single employer trust-based schemes, which may still rely on some paper-based records.
A two-year trial period would allow more time to deliver and test the database using live data, without public scrutiny and potentially flawed commercial consequences.
Forward-looking investment metrics
The introduction of forward-looking investment metrics (FLMs) is a new part of the latest proposals and need very careful consideration. The consultation asks whether (and how) these should be combined with historical investment performance.
We see major risks in combining factual past performance with predictions of future performance based on subjective views of trustees or firms, even allowing for them having to obtain independent advice.
As FLMs are subjective, we believe they shouldn’t be included in the initial stages of the rating assessment but left to the rationalisation stage alongside other subjective calls.
Quality of service metrics: recognising the role of member engagement
We welcome the FCA taking on board industry feedback and looking to streamline the data required within the framework. In some areas, we believe there’s scope to reduce these further, but by contrast, we’re still disappointed that engagement metrics have been downgraded to a single metric – being the percentage of savers who’ve completed a death benefit (or expression of wish) nomination form.
On its own, this is unlikely to provide a full or accurate picture of how engaged members really are, but where schemes do invest in engagement, it can have a big impact on outcomes – be that saving adequately or making better “at retirement” decisions. Our proposed trial period would give the regulators time to work with the industry on improving this aspect of the framework.
No matter how good quality of services metrics are, under the proposed assessment process they can only be used to downgrade RAGG ratings, not to improve them – which doesn’t seem balanced.
Why a two-year trial period is critical
Given the scale of the proposed changes, we strongly believe there should be an initial two-year trial period before the VFM Framework is fully implemented. This would help avoid any unintended consequences and give the pension industry (as well as the employers and members it serves) confidence in the process and outputs.
We’re urging regulators to start with the largest default arrangements within multi-employer schemes, alongside the largest single employer trusts – taking learnings from these before a full rollout. A trial period would help confirm if the proposed data fields are truly helpful in assessing value – potentially uncovering areas where those supplying the data are interpreting the requests inconsistently.
It could also check for any unintended outcomes produced by the market comparator, allowing FLMs to be analysed. And it would offer valuable insights into how IGCs and trustees will apply the rating process, including in the rationalisation stage of their assessments.
During this time, we propose the metrics and RAGG ratings (provisional or otherwise) are shared with the regulators, but not made public or require closure to new employers. Providers and schemes could then use this time to make improvements or consolidate into main scale default arrangements, including using contractual override.
Looking ahead
If done well, the VFM Framework has the potential to be a real force for good. But if rushed, there are massive risks of it being flawed.
We’re calling on regulators to run the framework initially on two-year trial period to make sure it’s operating as intended and producing fair comparisons.
The trial could learn from the largest multi-employer defaults and single employer trust-based schemes. It could then be launched fully and publicly from 2030, coinciding with the deadline for main scale default funds or mega funds to reach £25 billion. This would also allow providers to use contractual override to consolidate older style defaults into their scale default arrangements.
We’re hoping that regulators are open to our proposals and look forward to the next round of VFM Framework consultations.