Pensions Bulletin 2026/02

FCA launches further consultation on value for money framework 

The Financial Conduct Authority (alongside the Pensions Regulator (TPR) and the Department for Work and Pensions) has launched the next consultation on the value for money (VFM) framework for DC pension arrangements. This had been expected and contains updated proposals reflecting feedback from the previous FCA consultation in August 2024 (see Pensions Bulletin 2024/31). TPR also concurrently published a press release and statement in support of the latest consultation. 

The Framework is still intended to “support a significant shift in the way the workplace pensions industry operates and competes” and to initially apply to most contract and trust-based workplace DC default and quasi-default arrangements in accumulation. Decumulation, and small self-administered schemes and executive pension plans remain out of scope. However, there is a stated intention to review the Framework’s scope in due course and extend it.  

The Framework is still based on three core components but there have been several changes made to these, as well as the actual assessment process, as we go on to describe. 

1. Investment performance 

The FCA has agreed with feedback that a 15-year reporting period serves little purpose and should be removed. However, the requirement to report over a 1-year period is retained on the basis that this should be readily available and can, for example, provide insight into recent trends. Therefore, disclosure of backwards looking investment performance data will be required based on periods of 1, 3 and 5 years where available, and 10 years where reasonably practicable to obtain. And these disclosures will still be needed for 3 cohorts of membership, namely 30, 5 and 0 years to retirement (YTR) reflecting growth, de-risking and at retirement respectively. Various proposals are also made to the calculation methodology to be used. 

A significant change to the original proposals is that, following feedback received, the FCA now proposes to include forward-looking metrics (FLMs) as well as the above backward-looking metrics (BLMs) into the Framework. This requires the reporting of expected net investment returns and expected annualised standard deviations over the next 10 years, across the entire asset portfolio for the same three YTR cohorts as for BLMs. The FCA also proposes a number of guardrails to manage the risks of inflated or unrealistic FLMs which includes taking advice from an appropriate third party. 

Despite some concerns raised about having asset allocation disclosure in the Framework, the FCA is not intending to make any changes to its initial proposals. 

2. Costs and charges 

The FCA now proposes a streamlined set of costs and charges data and removes the need to disclose such data for a 15-year period. Additionally, for the 3, 5 and 10-year reporting periods, data will only be required for total costs and charges and a split between service costs and investment charges is no longer required. For the 1-year reporting period, this split remains a requirement. 

The FCA is not proposing to make any changes to the treatment and separate disclosure of employer subsidies in such costs and charges.  

3. Quality of service 

In contrast to the previous two components (which are largely data driven), assessing quality of service is in many ways the trickiest VFM component to compare because of the lack of uniformity across the industry of how this is assessed. 

Perhaps as a result of this, the FCA acknowledges that standardising service metrics requires further industry collaboration. As such, proposals for service quality metrics are more limited in this consultation, with a view to refining them in subsequent engagements. In particular, the FCA now believes that more work is needed on the customer satisfaction survey proposal and is no longer intending to include the survey at the launch of the Framework but will revisit this in the medium term. 

The assessment process 

A major change from earlier proposals is the move from comparing arrangements only against a small number of peers to assessing them against a commercial comparator group. This means that all participating arrangements will submit data into a centralised VFM database. This database will provide comparative data (the mean, the median, maximum and minimum) for all investment performance, costs and charges, and relevant quality of services metrics. Schemes will be expected to compare their own arrangements against the comparative data.  

A further significant change is that there will now be four possible VFM ratings: 

• Dark Green (value): clearly outperforming, no or few improvements could be made 
• Light Green (value): Improvements could be made to increase value 
• Amber (not value): Can be improved to reach value 
• Red (not value): Cannot be improved to reach value – must transfer where in best interests of members 

This replaces the original three-point “RAG” ratings, allowing better distinction of top performers and those requiring improvement.  

Next steps 

Consultation closes on 8 March 2026. For contract-based arrangements, the FCA will introduce detailed rules through the FCA Handbook. For trust-based arrangements, the DWP will consult on regulations under the Pension Schemes Bill, and TPR will also consult, as appropriate, on any necessary Codes of Practice or Guidance.  

As set out in the previous consultation, and subject to the legislative process for the Pension Schemes Bill and underlying regulations, it is intended that both contract and trust-based arrangements will come into force at the same time. The expectation is that the first VFM assessments will be required in 2028. 

Proposed approach set out to deliver private sector pensions dashboards

The Pensions Dashboards Programme is seeking feedback on how to best support the delivery of private sector pensions dashboards which are to follow from the Government funded MoneyHelper Pensions Dashboard whose launch has yet to be announced.

The PDP is putting forward an “industry participant approach” which involves a group of industry organisations working in close collaboration with the PDP, following agreed ways of working.

The PDP has used this approach to test connection to the pensions dashboard ecosystem, involving a group of around 20 organisations (previously known as the “voluntary participants”), who are either facilitating the connection of pension providers and schemes to the ecosystem or connecting directly. The PDP says that this has enabled the PDP to develop close working relationships beneficial to the PDP and the industry participants. Also, by a happy accident, this group represented total or near total coverage of the parties who will be connecting as, or on behalf of, providers and schemes.

The PDP expects that given private sector dashboards are likely to have different operating models and variation in the level and type of activities, the scope of the industry participant group for them is likely to need to be wider. It goes on to set out its proposals, including for membership, activities and scope, and ways of working.

Consultation closes on 10 February 2026.

UK sustainability reporting standards – an update 

The Government has provided an update on the process being deployed to finalise two UK Sustainability Reporting Standards, on which consultation closed in September 2025 (see Pensions Bulletin 2025/26). As things currently stand, we have yet to hear from the Government whether it will endorse these standards, which had been intended to be made available for use on a voluntary basis, from autumn 2025. 

In a letter from the Department for Business and Trade to the Financial Conduct Authority, the Department says that certain changes will be made to the proposed Standards before they are published in final form, which it is anticipated will be done “early this year”. The FCA, for its part, is to consider whether to introduce requirements for certain UK entities to report against these standards and will consult shortly on amendments to the UK Listing Rules but based on the draft rather than the final standards.  

Pensions Commission report – an update 

In a written parliamentary answer, Pensions Minister Torsten Bell has said that the Pensions Commission is expected to publish its final report in the first half of 2027. 

The Pensions Commission was set up in July 2025 (see Pensions Bulletin 2025/29) and we understand that it intends to publish its interim report in Spring 2026, which will outline the evidence base and strategic direction for the Commission's work.