Value for Money Framework metrics must be refined to deliver its ambitions for pension savers, says TISA
Today, The Investing and Saving Alliance (TISA) have submitted its response to the FCA and TPR consultation CP26/1: The Value for Money Framework.
In their response, TISA expresses their full support for the Value for Money Framework’s (VfM) ambitions and the three comparative pillars of Investment Performance, Costs and Charges and Quality of Service. However, they raise concerns about the proposed metrics, which could limit the benefits seen by pension savers.
Therefore, TISA have made the following recommendations:
- Engagement metrics must be included within Quality of Services. Their omission from the framework means it is not holistic and ignores the opportunity to increase consumer engagement with their pensions and empower them to make informed decisions, creating good outcomes in the long term.
- Given the scale of this initiative, there is potential for unintended reputational, commercial and member consequences. A two-year test period would allow the framework to be implemented as intended. Crucially, a live date of 2030 aligns with the scale requirements deadline, the point where there will be a significant reduction of default arrangements which would fall within the scope of VfM, simplifying the transition for everyone.
- Given their speculative nature, the integration of forward-looking metrics should be done cautiously and should be kept separate from factual backwards-looking metrics. Blending the two could distort VfM assessments and potentially penalise schemes for projections that are inherently uncertain.
- The overall Value for Money rating needs to be calibrated carefully at a level where good schemes can pass, whilst providing an incentive for others to improve.
Renny Biggins, Head of Policy: Products & Long-Term Savings, at TISA, commented:
“The VfM framework has the potential to be transformative for pension savers. With the pensions industry and millions of members counting on the FCA to get this right, refining the metrics which underlie the initiative could be the difference between delivering better outcomes or ultimately harming the very members the framework is designed to support.
Adding engagement metrics, creating a two-year test period, separating forward-looking metrics and backwards-looking metrics and ensuring the overall VfM rating is calibrated at a level to reward good schemes and incentivise improvement, are all changes which would improve the likelihood of delivering better outcomes for pension savers immensely.
We look forward to continuing to work with the FCA, TPR and DWP on this framework to deliver for those saving for retirement.”
ENDS
Notes to editors
- For a copy of the full consultation response, please contact tisa@tendoconsulting.co.uk
- CP26/1 is the FCA and TPR consultation on a Value for Money framework for defined contribution workplace pension schemes. The consultation closes on the 8th March. The framework aims to drive consolidation and improve outcomes for pension savers through standardised comparisons across investment performance, costs and charges, and quality of service.
- TISA is a not-for-profit membership organisation committed to improving the financial wellbeing of all UK consumers by working collectively with the financial services industry to deliver solutions and champion innovation, for the benefit of people, our industry, and the nation.
- TISA has approximately 270 member firms involved in the supply and distribution of savings and investment products and associated services. Members include the UK’s major investment managers, retail banks, online platforms, insurance companies, pension providers, distributors, building societies, wealth managers, third-party administrators, FinTechs, financial consultants, financial advisers, industry infrastructure providers and stockbrokers.