DWP opens new VfM framework consultation

Commenting on the DWP’s Value for Money Framework Consultation, Anthony Ellis, Head of DC Trust Consulting, Hymans Robertson, said:

“We welcome the Government, FCA and TPR moving the Value for Money (VFM) Framework closer to implementation, with a clear focus on member outcomes and long-term investment performance. It represents an important step towards a more transparent, performance-focused DC pensions market that better supports savers in achieving stronger retirement outcomes. The proposed framework represents a shift away from judging schemes primarily on low cost and towards a broader assessment of value, including investment performance, service quality and charges. Greater transparency and consistent disclosure standards should help trustees, employers and savers make better-informed decisions and drive higher standards across the market.

“The decision to phase implementation is pragmatic. It recognises the operational challenges involved in establishing a new industry-wide framework. At the same time is allows schemes time to build data capabilities which should help support more reliable reporting. The proposed focus on larger schemes in the first year is sensible. But, it will be important that the transition to full market coverage remains achievable and proportionate for all providers. Putting an emphasis on long-term net investment performance and the move towards metrics that better reflect members’ actual investment journeys as they approach retirement is a move that we support. The increased transparency around forward-looking assumptions, asset allocation and investment strategy is also a positive development. This should improve scrutiny and accountability. 

“We are pleased that there is recognition that different retirement objectives require different measures of success. In particular, it is good to see the proposal to compare retirement-stage strategies against peers with similar decumulation aims. The proposed central VFM database could become a valuable industry resource.  It must, however deliver high-quality, comparable data and maintain appropriate safeguards around commercially sensitive information for it to be worthwhile.

“As implementation progresses, it will be important to ensure that reporting requirements remain proportionate. Onerous reporting could inadvertently discourage innovation, investment diversification or investment in productive assets that may improve long-term member outcomes.”

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