Katie smith speaks for Aegon when she calls for a 2 year trial period before VFM bites. She calls it a “trial period” and it’s an attempt to kill VFM before it kills providers.

Here she is in Corporate Adviser

Aegon UK has called for a two year trial period for the government’s upcoming Value For Money pension scheme framework, arguing that the “fiendishly complex” concept could not be widely adopted without full testing.

Aegon made the statements during an ongoing consultation period overseen by the Financial Conduct Authority on the framework. The latest consultation closes on March 8, and looks to address areas such as the introduction of forward-looking metrics to be considered alongside backward-looking metrics in assessments, and a four-point rating system rather than three, to allow identification of top performing pension funds.

Aegon claimed there is ongoing uncertainty over implications of forward-looking investment metrics, and that a feasibility study was needed around the new market comparator proposal, with Aegon calling for a two-year trial period of the framework.

This would mean that the public (aka the press) would not have acess to information till the next decade

Kate Smith, head of pensions at Aegon UK, said: “We support the aim of ensuring all workplace members are in a scheme offering value for money judged across investment performance, costs and charges, and quality of services. But coming up with an objective framework that covers all components of VFM across a diverse pension landscape is proving fiendishly complex.

It is of course a feature of VFM as most people understand it , that it is easy for someone to understand,

In the latest consultation, the regulators introduce several fundamental changes. These include a completely new market comparator database, the addition of forward-looking investment metrics, and a worrying downgrading on quality of member services and engagement aspects.”

Aegon argued for the proposed trial to be limited to the largest multi-employer default arrangements and the largest single employer trust-based schemes, with the data shared only with the regulators. It could then be launched fully and publicly from 2030, coinciding with the deadline for main scale default funds or mega funds to reach £25bn.

I have sympathy with the commercial providers. The time taken to report on VFM could make them uncommercial and could reduce their capacity to provide their clients with value for their money.

But what an opportunity they’ve missed. In the case of Aegon, AgeWage has run a VFM score for a GPP it runs for several years. We would be happy to let Aegon share the reports we provide to its employer and the members of the scheme. It is effective, cheap to run and it runs using a scoring system that is driven by the internal rates of return earned by each individual saver.

I do not think it is either expensive or hard to get the data to score individual performance nor to aggregate the individual IRRs against an individually marked benchmark score. It has been done millions of time and the only reason it isn’t in common use since it’s introduction in 2019 is the failure of the commercial providers to adopt it.

Katie Smith and Antonia Balaam

So while I am sorry for Aegon’s current predicament, I cannot say I’m surprised. The chance for it (and other commercial providers) to adopt a simple system endorsed by many experts  means they are now left with something that is neither easy or effective.

There is time to go back and revisit the AgeWage system, but I have other things to bother myself with when it comes to VFM. Measuring accumulation of savings is fine if all you are interested in is what happens to retirement , but we are past that now. Now we have many members past retirement trying to turn pot to pension or simply cashing out.

We have a CDC pension that the Government reckons will adopt up to 60% more pension. Is anyone really considering the performance of DC accumulation as a measure of VFM?