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.