The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have confirmed plans to develop common measurements which will allow industry professionals and pension savers to better compare defined contribution pension schemes so they can see which offers more value for money.
A new common approach across industry should allow access to consistent data on investment performance, costs and charges and service standards. Over time, this greater transparency should improve competition, encouraging pension schemes to improve the value they provide and help deliver more secure retirements for savers.
TPR and FCA launched a discussion paper last year to establish how best to measure value for money. Currently, it is hard to consistently compare fees and charges, investment performance and quality of service, making it hard to gauge whether savers are receiving value for money. Responses demonstrated clear support across the industry for a consistent approach to the issue.
However, respondents also highlighted complex questions about how to achieve this. Further work is needed on what should be disclosed and how.
The two regulators will continue to engage with industry and consumer groups in the coming months. TPR, FCA and the Department for Work and Pensions will work together and publish a consultation towards the end of 2022, setting out proposals.
Minister for Pensions Guy Opperman said: “Ensuring value for money for the record number of Brits now saving for retirement is one of my key priorities.
“While cost continues to dominate decision-making, this does not always lead to the best member outcomes. We want those making choices about where people save their money to take into account more than just price, and I look forward to progressing this work alongside TPR, the FCA and industry.”
David Fairs, TPR’s Executive Director for Regulatory Policy, Analysis and Advice, said: “We and the FCA are determined to drive a long-term focus on value for money across the pensions sector and welcome the depth and breadth of responses to our discussion paper on a common framework.
"Particularly welcome is the broad consensus from industry that we need a better assessment of value for money to deliver stronger outcomes for savers in areas such as costs and charges and investment performance. But we acknowledge this is a complex area and there were many views on our proposals which need further consideration."
Sarah Pritchard, the FCA’s Executive Director for Markets, said “Consumers should be able to have confidence that their pension is delivering value for money.
“The changes we and TPR propose will help achieve this – and over the long term, help deliver a more secure retirement for pension savers. We will continue working with industry over the coming months to make sure we get this right.”
Notes to editors:
- The FCA and TPR today published a feedback statement on the discussion paper which attracted wide ranging views including those of pension providers, industry trade bodies, trustees of occupational schemes, Independent Governance Committees (IGCs), and their advisers.
- The joint FCA and TPR discussion paper built on the joint pensions strategy published by the FCA and TPR in October 2018, which outlined how the regulators will work together to tackle the issues facing the sector over the next five to ten years. The joint strategy identified the lack of comparable information as a key factor behind the lack of effective competition and value for money in the pensions market.
- The FCA previously published a Policy Statement (PS21/12) in October 2021 with rules to make it easier for IGCs and GAAs to compare the value for money (VFM) of pension products and services.
- The FCA’s Our Strategy 2022 to 2025 set out the FCA’s expectations for financial services over the next three years and how it will measure its performance, to improve, adapt and deliver in the interests of consumers, markets and the economy.
- TPR’s Corporate Strategy includes a strategic goal of ensuring savers get good value for money.
- Responsibility for regulating pensions in the UK is split between the FCA and TPR. The FCA regulates the provider of contract-based defined contribution schemes, with 30.7 million members and £728 billion assets in accumulation, of which approximately 12 million members and £260 billion assets are in workplace pension schemes. TPR regulates trust-based occupational pension schemes which include 9.9 million members of defined benefit schemes with £1,700 billion in assets, and 18.2 million members of trust-based defined contribution schemes (including master trusts), with £218 billion in assets.
- The Financial Conduct Authority is the conduct regulator for around 51,000 financial services firms and financial markets in the UK. Firms and individuals must be authorised or registered by the FCA to carry out certain activities. Find out more about the FCA.
- The Pensions Regulator is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
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