Bell
What practically will the work on Value for Money mean to providers , employers and ultimately savers into our DC plans? We have this statement from the FCA
We plan to offer roundtables and stakeholder events to discuss practical aspects as we develop the Framework. As set out in the previous consultation, and subject to the legislative process for the Pension Schemes Bill 2025 and underlying regulations, we
intend that both contract and trust-based arrangements will come into force at the same time. We are currently working towards 2028 for the first VFM assessments to be required.
Let’s work back from that to now and we see a project that has been ongoing three years (It was introduced in 2024 by the then Pension Minister Laura Trott). We are halfway into the implementation of VFM and we have reached conclusions that I’ve been surprised at. I have been surprised that the consumer has yet to be involved in the thinking of FCA and TPR. We have one consumer event between now and 2028 – the pension dashboard.
My assumption was that consumers would be the ultimate users of VFM scores and this seems to be Torsten Bell’s too. Here he is in a blog that accompanies the latest consultation on VFM by the FCA
Minister for Pensions, Torsten Bell, said:
‘It is simply too difficult for people to know whether their pension savings are working for them. That’s not right when we’re talking about something as important as people’s security in retirement.
‘These proposals change that. Pension schemes’ performance will be public with a simple rating system. In future, savers will know if they are getting a good return or not.
‘This is about being straight with people and making sure people’s savings work as hard as they did to earn them.’
I doubt the Pensions Minister has been reading the headline of this blog but we are at least as one in wanting savings to work as hard as we did to get them.
VFM is about what you get in retirement, the Pensions Dashboard will show you an income and you will be able to refer that provider’s VFM to one of four colours.
These are instructions to employers on what can be done to get to green. But for savers viewing their dashboard, the question may be more explicit. Do I want to entrust my retirement finances to a red one or a green one and why am I in a red one when my employer and/or adviser made the choices.
I do not see VFM as without risk for consumers or consumerists or advisers. Any system that calls providers to account retrospectively runs that risk. But Forward Looking Management (FLM) is of little use to savers who have lost confidence in the backward management of their money and I suspect the capacity of DC providers to maintain hold of money when they have a history of failure will be limited, especially if the pension dashboard catches on.
For VFM to be effective it must do, as Torsten Bell asks, and show consumers how they are doing ; there will be very real alternatives by way of pensions coming into play by 2028.
The consumer bears all the risk in DC pensions.