DWP must learn from the abject failure of TPR’s VFM reporting.

The current VFM measurement system is failing miserably

This is the conclusion of Government research published yesterday (July 4th)


The DC schemes survey (PDF, 2,191KB, 47 pages), published today (Tuesday 4 July), showed a lack of awareness from small schemes around new value for members assessments

The old “value for members” system is still failing

The original Value for Members requirements were introduced in July 2016 but are still not being followed.

Problems center around an obscure measure – “the Key Governance Requirement for measuring Value for Money (KGR2)” KGR 2 which requires that Trustee boards must assess the extent to which member-borne charges and transaction costs provide good VFM

For all scheme sizes, the primary reason for not meeting KGR 2 was that they did not research the characteristics, preferences and needs of members and take account of this when assessing VFM.

A third of schemes (33%) met this aspect of the requirement, ranging from 78% of master trusts to 21% of small schemes.

Figures above the bar show changes since the last survey in 2021


That two thirds of schemes are not complying with a key regulatory policy shows either a very poor compliance or a policy that is simply not fit for purpose. Trustees are aware of their need to comply with TPR dictats, they are not normally uncompliant, TPR has created unworkable requirements that need to be changed.

The new VFM requirement is failing even more!

Worse than this, it appears that most Trustees aren’t even aware that there is a new VFM requirement upon smaller DC schemes in 2021.

Of the 208 schemes with under £100 million AUM quizzed on their awareness of the assessment requirement, 64% reported they were unaware of it. Smaller schemes were more likely to be unaware of the requirements, with 58% small and 70% of micros schemes unaware compared with 15% of large schemes and 23% of medium schemes.

As was noted in last year’s LDI crisis, the small schemes are the problem. TPR should be aware that a failure among small schemes can create systemic problems. The Government has to be concerned that it cannot measure the VFM of small DC schemes.

Commenting on the numbers, TPR’s Nicola Parish asserted that all this was about to change

“The upcoming joint value for money framework will increase transparency and competition in the market, so now is the appropriate time for trustees to evaluate whether they can compete with the best master trusts in offering value for money.”

This is a bold statement and suggests that the new framework will bring change.

Are things changing?

The short answer is no. The net performance tables which were included in the New Value for Member assessments are what’s causing the trouble and they are simply copied across from TPR’s  current VFM assessment.

They require data that is not generally available and analysis which is beyond the internal competence or advisory budget of most trustees. They also require benchmarking against other schemes, something that is nigh-on impossible for all but the largest schemes.

Even were there the budget, there are not enough advisers competent to do the work.

The result is that these VFM assessments are not getting done

note – only one Maser Trust was surveyed

Predictably, those Trustees who had done some work on VFM, worked in their comfort zone (governance). Net performance and benchmarking were largely ignored. Less than a fifth of schemes had made an attempt to benchmark performance with other schemes.

Is there a problem?

The survey again shows that large schemes (especially master trusts) will throw resources at a problem to be compliant but that the smaller schemes, where problems are most likely to arise, are unaware or under resourced and therefore don’t comply.

Though most members are in large schemes, there are sufficient in small to matter – and matter a lot. The VFM framework must find new measures which are both intuitive and operable, not just for large schemes, but for small schemes and for sections of multi-employer schemes that are unique to one employer.

The DWP, TPR and FCA should not expect that compliance will improve , simply because there is a more comprehensive framework in place.  The issue is now out in the open – because of this research.

But the research shows that VFM is not yet considered an issue for most trustees. It has passed them by.  It will also have passed sponsoring employers by. Employers are interested in assessments that make sense to them, most multi-employer schemes do  not report at an employer level – VFM assessments need to speak to employers as well as trustees.

These issues have gone unnoticed since the 2021 introduction of the VFM regulations, because no-one reads Trustee Value for Member statements – even I suspect TPR. It took an external research unit (OMB) to tell the Regulator the scope of the problem

Despite this, the new Value for Money framework consultation imports the entire TPR apparatus for measuring and benchmarking net performance , recreating the problem on a larger scale.

This will lead to the same two fundamental issues

  1. Unawareness

  2. Non compliance

Is there a solution?

Yes. Other countries, notably Australia have opted for intuitive VFM measures that are operable and get noticed. They may be blunt, but they do the job.

It is time that net performance tables, which are inoperable and indigestible, be thrown out and replaced by data based on member’s actual experience.

The net performance tables are a DB fix to a DC problem and show that DC simply doesn’t fit into the DB box.

A better way is available and we at AgeWage, along with an increasing number of consultants and trustees, argue for it.

For those of us who believe in VFM as a measure, it is impossible to stand by and see the Government continue to hammer square pegs into round holes.

It needs to listen to industry practitioners and data experts who align their interests to the interests of the end users of VFM assessments- trustees, employers and ultimately members.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to DWP must learn from the abject failure of TPR’s VFM reporting.

  1. Pingback: Is history bunk? Or does past performance matter? | AgeWage: Making your money work as hard as you do

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