FCA reviews value for money in workplace pensions

FCA has opened a fresh front in the pensions “value” debate with CP24/16, consulting on a detailed Value for Money (VFM) framework for savers in default arrangements of workplace defined contribution (DC) schemes in 2025. While framed as conduct regulation, the proposals reach directly into product design, investment strategy and disclosure for contract-based workplace pensions, and will shape how insurers evidence value, scale and performance in their DC books.

Implications for insurance CIOs and ALM teams • Default DC strategies will be judged against regulator-defined performance benchmarks, increasing pressure to demonstrate net-of-fee outperformance over time rather than simply low cost. • Mandatory remedial actions for “not VFM” defaults will constrain how long insurers can run subscale, legacy or higher-fee strategies, accelerating consolidation and product rationalisation. • A holistic value lens across investments, costs and services will push CIOs to evidence the contribution of illiquids, active risk and decumulation design to member outcomes, not just headline performance. • With DC assets now larger than DB, the framework will increasingly define the regulatory perimeter for insurers’ growth capital, private markets and retirement income propositions.

The VFM framework: scope and regulatory intent

The FCA’s CP24/16 sets out detailed rules and guidance for a new VFM framework covering savers invested in default arrangements of workplace DC pension schemes operated by FCA‑regulated firms. The consultation is explicitly targeted at contract-based pensions, although the FCA notes that the rules are grounded in joint work with the Department for Work and Pensions and The Pensions Regulator, signalling a single cross-regime direction of travel. The government has separately framed the overarching objective as shifting the focus of employers, trustees and managers from cost towards value. Together, these signals confirm that regulators now expect providers to justify investment and service propositions through member outcomes, not just compliance with charge caps. While the FCA’s consultation focuses on conduct rules, the government has also embedded “putting in place a value for money regime” in the Pension Schemes Bill, underlining that VFM is becoming a statutory organising principle for workplace pensions.

Measurement, benchmarks and machine-readable disclosure

Under the measurement and disclosure element, firms would be required to produce a machine-readable “flat file” containing the raw data they publish, arranged to a specific template. The regulator expects this standardisation to enable like-for-like comparisons across providers and schemes, and to support third-party analytics and employer decision-making.

The government has indicated it expects regulators to define industry performance benchmarks as part of the VFM framework. For CIOs, this moves the focus from bespoke, scheme-specific objectives to explicit comparison against common reference portfolios, with implications for asset allocation, risk budgeting and the use of illiquids or factor tilts. Portfolio-level disclosures under the incoming framework are scheduled from 2028, giving insurers a finite runway to align investment design and data architecture.

The framework encourages a holistic view of value, requiring assessment across investments, costs and services rather than a narrow focus on charges. This aligns with the stated aim of driving competition on long-term value rather than predominantly cost, and will force providers to quantify the value-add of engagement, communications, retirement support and operational resilience alongside net performance. This moves VFM from an internal governance concept to an externally visible signal that employers, advisers and members can use to compare providers. While the consultation sets out the detail, the regulatory intent is clear: providers should not be able to leave members in persistently poor-value defaults. This is likely to accelerate consolidation towards propositions that can demonstrate scale efficiencies, strong governance and consistent delivery against the new benchmarks.

Timetable, market context and interaction with wider reforms

Implementation of the VFM framework is scheduled for 2028, aligning with the start of portfolio disclosures under the regime. Further FCA consultation on the framework is flagged for 2025 Q3/4, and the FCA has separately confirmed that the next VFM consultation will come later this year, indicating a multi-stage process to finalise rules and benchmarks.

The reforms land in a market where the value of assets in DC pensions now exceeds the defined benefit market, which shows why regulators are focusing on DC outcomes and governance. In parallel, the FCA has launched CP25/39, “Adapting our requirements for a changing pensions market”, signalling a broader reset of pensions regulation as DC becomes the dominant retirement vehicle. For insurers, this means the VFM framework should be treated not as a standalone disclosure exercise but as the regulatory spine for future product design, consolidation and retirement income strategies.

Closing the loop between consultation and implementation, the key constraint for CIOs is the 2028 go‑live for VFM and portfolio disclosures, with the next FCA consultation later this year likely to crystallise benchmark design and data requirements that will drive investment and systems change.

--- Sources: https://www.fca.org.uk/ https://www.fca.org.uk/publications/consultation-papers/cp24-16-value-for-money-framework https://www.invesco.com/content/dam/invesco/uk/en/pdf/press/2025/government-vows-to-make-uk-workplace-pensions-great-again-5-jun-25.pdf