TPR and FCA confirm the development of joint VFM measurements

The pensions regulator (TPR) and the Financial Conduct Authority (FCA) have confirmed their intention to develop common measures to help benchmark the value for money (VFM) of defined contribution (DC) pension schemes.

The common approach offered across the industry aims to enable access to consistent data on investment performance, costs and charges, and service standards.

Regulators hope the metrics will allow industry professionals and savers alike to better compare DC regimes to see which offers the best VFM.

Over time, this increased transparency should improve competition, which will encourage schemes to improve the value they provide and help provide safer retirements for savers, regulators say.

TPR and the FCA launched a discussion paper last year to determine how best to measure VFM, with regulators noting that it was “difficult” to systematically compare fees and charges, investment performance and quality of service , making it difficult to assess whether savers are receiving value for money.

They added that the responses to the document demonstrated “clear support” from across the industry for a consistent approach to the issue.

However, regulators noted that more work was needed on what should be disclosed and how, as respondents also pointed to complex questions about how to achieve common metrics.

They will continue to engage with industry and consumer groups over the coming months on disclosures and metrics.

TPR, FCA and the Department for Work and Pensions will work together to publish a consultation “towards the end of 2022”, setting out the proposals.

Commenting on the announcement, Pensions Minister Guy Opperman said: “Ensuring value for money for the record number of Britons currently saving for their retirement is one of my top priorities.

“While cost continues to dominate decision-making, it doesn’t always lead to the best outcomes for members. We want those choosing where people save their money to consider more than price, and I look forward to taking that work forward alongside TPR, FCA and the industry.

TPR’s Executive Director for Regulatory Policy, Analysis and Advice, David Fairs, added: “We and the FCA are committed to a long-term focus on value for money in the pensions industry and we welcome the depth and breadth of responses to our discussion paper. on a common framework.

“The broad industry consensus that we need better value-for-money assessment to achieve better outcomes for savers in areas such as costs and fees and investment performance is particularly welcome. But we recognize that this is a complex area and there were many views on our proposals that require further consideration.

FCA’s Executive Director for Markets, Sarah Pritchard, said: “Consumers should be able to be sure that their pension offers good value for money.

“The changes we and TPR are proposing will help achieve this goal and, in the long term, provide a more secure retirement for savers. We will continue to work with industry over the coming months to ensure we get it right. »

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