Altus Consulting welcomes the opportunity to respond to the FCA’s Value for Money (VfM) framework proposals. While we support the ambition to ensure pension schemes deliver real value to members, particularly in the workplace pension sector where consumer inertia is a central issue, we believe the current proposals are overly complex. The extensive data requirements may overwhelm governance boards, firms, and even the regulator, making it difficult to establish clear and consistent measures of value across all schemes.
We recommend a more measured, phased approach, starting with a pilot phase to refine the framework using real-world data without the distraction of premature penalties. This would allow regulators and the industry to focus on refining the framework and give firms time to adapt before facing consequences. Starting with a minimum viable product (MVP) would reduce initial costs, allow for manageable implementation, and ensure the most critical components are in place before adding complexity.
We also raise concerns about the proposed RAG rating system, which may oversimplify the complexities of assessing VfM. A binary rating system risks disproportionate commercial and reputational impacts for firms without flexibility to address specific issues. Additionally, the framework must include legislative changes allowing the bulk transfer of members from red-rated schemes to avoid savers being trapped in underperforming arrangements.
Finally, while improving the data used to track VfM is a vital step, data alone won’t drive the necessary change. With many savers and employers disengaged, an independent third party is needed in order to define a clear set of VfM standards and ultimately hold schemes that do not meet them directly to account. In the absence of alternatives, we believe regulators must take on this role. Leaving the industry to set its own benchmarks risks underperforming schemes finding ways to game the system. For the framework to be effective, a watchdog with teeth is essential to protect savers and ensure VfM delivers on its promises.
Ultimately a simpler, phased framework with clear oversight is essential for this work to deliver a meaningful value for money system for the UK auto-enrolment pension market.
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