Regulators feed back on VFM – in the shadow of the dashboard.

The Pensions Regulator and the FCA have produced a quirky feedback statement on its consultation on driving value for money from DC pensions. Quirky, in as much as it reports the diversity of responses without coming to any conclusions as to what the future regulations governing VFM’s calculation, disclosure and use might be.

We are given hints about the direction of travel.

“An excessive focus on cost may result in the other key elements of value not being given appropriate consideration, which is why we want to encourage a shift in focus to long-term value for pension savers.”

And there is a hint that Australia is the model that is likely to be pursued

“As rule makers and regulators, we want to work towards a framework that allows industry stakeholders to assess and compare pension scheme value on a consistent basis, with data published in a format readily accessible to third parties such as trustees, independent governance bodies, investment consultants and employee benefit consultants. Over time, we envisage industry comparisons of VFM being published and will be learning from other countries about the best way to make this work (for example, Australia’s ‘league tables’ model)”

But for the most part the paper is a litany of reasons why league tables of past performance should not be used and further proof that there is no consistency in thinking about what a VFM standard might look like.

Regular readers of this blog will know that this is something well known to all. Exposing workplace pensions to the possible shame of being at the bottom of a league table is something that no trustee or IGC should allow to happen. Not only would it be commercially damaging, it could lead to employers and savers engaging with the products they have purchased and potentially moving money to other more successful pensions. This would almost certainly lead to a lot of extra work for providers and be a (insert where applicable)

  1. A scammers charter
  2. An incitement to short-termism
  3. A loss of qualitative benefits (such as good communication)
  4. An abandonment of good governance
  5. Loss of value in transition

In short, the industry view is that any transparency on value must be provided on the industry terms and not by means of factual information about what has actually happened.

The day of reckoning is coming.

No doubt I will hear many such views from those on stage at this week’s PLSA conference.

Thus far, the threat from value for money has been contained by arcane discussions about costs and charges and silly fireside chats about the value of engagement. The costs and charges debate will of course be important in assessing whether there is value in moving up to 20% of DC defaults into private markets , but it is a discussion to be had between those negotiating the terms of contracts. Similarly the value from private market investments seems to depend on the capacity of asset managers to get savers cash invested so as to produce the long-term returns. But this is more digression

The day of reckoning is the day that people can start seeing all their workplace pension savings in one place and look at the outcomes of these savings relative to their expectations and relative to each other.

Unless there is some meaningful way of comparing the various pots and pensions that people are receiving or likely to receive, the pension dashboard will be no more than a display counter. Value for Money is the measure by which pots can be compared, combined and ultimately spent.

If we are serious about helping the millions of savers who have no intention of buying advice on these matters, we are kidding ourselves over dashboards.

People will want to see their pots in one place and when they do they will be asking simple questions as to what they should do next. Without a simple measure of value for their money, there will be more frustration both with providers and with Government.

We urgently need to make progress before the day of reckoning, the day of reckoning is at hand. I hope that Jo Gibson and her team will use this feedback to determine a positive way forward. I look forward to helping with suggestions that do not fall into the “too difficult” bucket.


This is of course a reference to Australia, which makes no pretence at nuancing value for money, VFM in Australia is about what you get from your Super Account relative to the timing and incidence of the contributions you pay. Comparisons are made using past performance as a guide to value and that performance is measured net of cost and charges.


Yes Minister

I am pleased to see that this blog has met with Ministerial approval


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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