Pensions: Value for Money Framework – Live Consultation (ends 27/03/2023) ✍

Pensions: Value for Money Framework – Live Consultation (ends 27/03/2023) ✍

In the UK, the overall responsibility for regulating the pensions industry is largely split between the Financial Conduct Authority (FCA) & The Pensions Regulator (TPR).

The FCA regulates personal pensions in the UK, including workplace personal pensions, and regulates the conduct of around 50,000 firms in the UK. This is to ensure that markets function to an acceptable standard and regulated firms meet their obligations, standards and the rules as set out in the FCA Handbook.  The FCA has key objectives set out in its business plan and on its website, aimed at protecting consumers, maintaining market integrity, promoting competition, and aligned to be in the interests of consumers.

The Pensions Regulator regulates occupational pensions in the UK. There are statutory objectives in place to protect savers’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve the 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).

Jointly the FCA & the TPR have issued a consultation paper CP23/4:

https://www.fca.org.uk/publications/consultation-papers/cp23-4-value-money-framework-metrics-standards-and-disclosures

This consultation runs until March 27th, 2023 – it is aimed at:

• DC pension scheme trustees and managers
• Independent Governance Committees (IGCs) of workplace personal pension schemes
• Providers of workplace personal pension schemes
• DC pension scheme savers and beneficiaries
• pension scheme service providers, other industry bodies, and professionals
• employers
• civil society organisations
• consumer organisations/representatives with an interest in pensions capability / financial capability
• pensions administrators
• any other interested stakeholders

Consumer Duty & delivering value for money in pensions, is a key priority to put savers & consumers at the heart of everything that the industry does. Governance and oversight of key outcomes are crucial, enabling firms and regulators to effectively assess value for money, product design and good outcomes. The consultation sets out the regulator’s ambitions for an industry-wide assessment framework to underpin and enable good governance and deliverables.

Historically, the pensions industry has been subject to inertia by pension holders, who do not actively interact with the management of their pensions. They rely on them achieving good outcomes over the life of the policy to provide for them adequately in later life when the benefits are needed. Under existing measures, it is not possible to accurately scrutinise schemes to compare value relative to others on the market and so the development of common standards and metrics should improve and deliver on the best possible outcomes for savers. The FCA and the DWP have collaborated to establish a common assessment framework, and a more consistent and structured approach to VFM assessment that drives long-term value for pension savers.

Consumer outcomes & pensions Industry reform/effectiveness for savers are central to the regulator’s strategies and they compel firms to deliver good outcomes for retail customers. It is clear that value for money is not just about costs and charges, so the consultation and proposals are structured to ensure that firms can deliver against value for money holistically. Consistency is key, and ensuring common metrics, standards and an approach, should ensure accurate disclosure and important decisions and actions to better protect consumers and ultimately provide better retirement outcomes.  Through the measures and promotion of transparency, competition, and innovation, the regulators hope to ensure that savers are receiving optimum value for money and that investments by trustees and providers are in the best interests of savers.

Managing your governance, metrics, and compliance with the associated rules and obligations can be a daunting task especially if this is compiled from many data sources, spreadsheets, and systems. Recognising the risks, metrics, indicators, and warning signs is not simple in an unautomated environment. Establishing automated and intelligent solutions is a critical factor in how firms adapt and deploy adequate systems of control to deliver on their obligations.

Speak to Grath to explore the value-for-money solutions we provide for Governance, Risk & Compliance, the reconciliation of key data, and how we can support you in revolutionising your control capabilities and maturity ahead of the policy statement that will follow this consultation.

For more details on the live consultation, please visit the FCA website here:

https://www.gov.uk/government/consultations/value-for-money-a-framework-on-metrics-standards-and-disclosures/value-for-money-a-framework-on-metrics-standards-and-disclosures

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