The FCA and the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) have published their latest consultation on the proposed Value for Money (VFM) Framework for defined contribution (DC) workplace pensions. CP26/25 represents an important step towards implementation of a framework that has been under development for several years. It follows the FCA’s previous consultations, including CP24/16 and CP26/1, and is intended to establish a broadly consistent approach to assessing value across both contract-based and trust-based workplace pension arrangements. At its heart is a relatively simple policy objective: workplace pensions should compete on the value they deliver to savers, rather than predominantly on price. That distinction matters. The cheapest pension arrangement is not necessarily the one that produces the best outcome for a member over several decades. Investment performance, service quality and charges all contribute to the eventual outcome. The proposed framework seeks to make those factors measurable, comparable and, importantly, actionable.
Moving the market away from a focus on cost
Cost has historically been one of the easiest characteristics for employers, advisers and providers to compare. However, low cost does not necessarily mean good value, particularly where differences in investment performance can materially affect outcomes over several decades.
Under the proposed framework, in-scope arrangements will disclose and assess standardised information across three areas:
- investment performance;
- costs and charges; and
- quality of services.
Cost therefore remains important, but as one component of a broader assessment. Providers will increasingly need to demonstrate what members receive in return for the charges they pay.
Greater comparability – and greater scrutiny
Standardised VFM data would be submitted to a central database, enabling arrangements to be compared against the wider commercial market. This greater transparency should make strong and weak performance easier to identify, but it also increases regulatory and commercial scrutiny. Firms will need confidence not only in the accuracy of their data, but in what that data demonstrates when compared with competitors.
VFM should therefore not be treated simply as an annual reporting exercise. Firms will need appropriate management information to understand their relative position and identify weaknesses before they result in a poor assessment.
Looking backwards and forwards
Investment performance will not be assessed solely through historic returns. The framework combines backward-looking and forward-looking metrics to provide a broader assessment of whether an investment strategy is capable of delivering long-term value. CP26/25 further refines the methodology, including a proposed geometric averaging approach intended to better reflect the experience of representative members as they approach retirement. The approach to forward-looking metrics has also changed. Rather than requiring firms and trustees to obtain third-party advice, greater emphasis would be placed on disclosure of the underlying assumptions. While potentially reducing cost, this places greater responsibility on firms to ensure those assumptions are credible, appropriately governed and capable of scrutiny. The question therefore moves beyond simply, “How did this fund perform?” Firms will need to demonstrate why their investment strategy remains appropriate and capable of delivering value in the future.
Asset allocation becomes more visible
The proposals also introduce greater disclosure around asset allocation, against the wider policy backdrop of encouraging pension capital to support productive investment and economic growth. This should not, however, be confused with a requirement to invest in particular asset classes. Member outcomes remain central. Firms and trustees should be able to evidence both where assets are invested and why the allocation remains appropriate for members.
Service quality becomes part of the value equation
CP26/25 also reinforces that investment returns and charges alone do not determine value. Poor administration or member experience can undermine outcomes even where investment performance is satisfactory. Providers will therefore need reliable data against prescribed service measures, increasing the importance of operational MI, data quality and oversight of administrators and other service providers. Operational weaknesses that may previously have been regarded primarily as administrative issues could increasingly affect the formal VFM assessment.
Poor value will eventually require action
The VFM Framework is intended to drive action, rather than simply increase disclosure. Arrangements will receive ratings, with consequences ultimately applying where sufficient value cannot be demonstrated. Importantly, formal consequences associated with amber and red ratings would not apply during the first assessment cycle in 2028, providing a bedding-in period. This does not make 2028 consequence-free: FCA-regulated firms will remain subject to existing Handbook requirements, including the Consumer Duty, while trustees remain subject to their existing duties.
From the second cycle onwards, poor-performing arrangements could be required to take corrective action, close to new business and, ultimately, consider transferring members elsewhere.
A phased implementation
The FCA proposes a phased introduction of the framework. In 2028, the full assessment and rating process would initially apply to larger arrangements, including Master Trusts, large single-employer trust arrangements with at least 50,000 members, and firm-designed open multi-employer contract-based arrangements. Other in-scope arrangements, including certain legacy, bespoke and smaller arrangements, would still collect and submit VFM data, but would not initially be required to publish that data or undertake the full assessment. From 2029, the intention is for the full disclosure, assessment and consequences framework to apply across all in-scope arrangements. The first data collection period has also been shortened and is proposed to run from 1 July to 31 December 2027, rather than covering the full 2027 calendar year. The phased approach provides additional implementation time, but firms should not assume that work can be deferred. The framework is data-intensive and firms will need confidence in their systems and data before the first reporting period begins.
What does this mean for firms?
The VFM Framework will require input across investment, operations, finance and product teams, with IGCs and GAAs requiring sufficient information to scrutinise assessments. Greater transparency may also affect employer and adviser decisions, meaning poor VFM results could carry commercial and reputational consequences. For providers with multiple arrangements, greater comparability may also drive product rationalisation or consolidation.
The interaction with Consumer Duty
For FCA-regulated firms, VFM should be integrated with existing Consumer Duty and product governance arrangements. While the regimes are distinct, VFM data on investment performance, service quality and charges should inform wider customer outcome monitoring, while Consumer Duty monitoring may provide early warning of issues that could affect future VFM assessments.
What should firms be doing now?
Firms should begin preparing ahead of the first full assessments in 2028 by identifying in-scope arrangements and conducting a gap analysis against the proposed data requirements. Particular attention should be given to data lineage, including ownership, validation and the consistent production of required metrics, alongside clear governance between providers, IGCs or GAAs, investment teams and service providers. An early “dry run” VFM assessment could also identify weaknesses in investment performance, charges or service standards and allow time for remediation before the regime becomes mandatory.
Looking ahead
CP26/25 is the final set of proposals ahead of implementation. Subject to the consultation outcome, the FCA expects to publish its Policy Statement and final rules in Q1 2027, with the DWP separately finalising the framework for trust-based schemes.
Responses to the consultation are required by 15 September 2026.
How Complyport can help?
- VFM Readiness and Gap Analysis: We can assess your existing arrangements against the proposed VFM Framework, identifying gaps across investment performance, costs and charges, service quality, asset allocation and underlying data requirements.
- Governance and Consumer Duty Alignment: We can review governance, oversight and management information to ensure VFM is appropriately integrated with existing Consumer Duty and product governance arrangements, with clear responsibilities and effective senior management oversight.
- Data and Reporting Readiness: We can review the systems, data sources and controls supporting VFM reporting, helping firms establish clear data ownership, validation processes and reliable management information ahead of the first reporting period.
Contact Us
To understand how these changes may impact your business, or to discuss how Complyport can streamline your compliance with the new Companies House requirements, get in touch to arrange a meeting with one of our Subject Matter Experts.
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