Regulators consult on new VFM framework

On 8 January 2026, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) published The Value for Money Framework: Response to consultation, further consultation and discussion paper. The paper addresses feedback on the FCA’s 2024 consultation for contract-based schemes and invites input from those involved with trust-based schemes to help shape regulations and guidance under the Pension Schemes Bill (the Bill). The consultation closes on 8 March 2026.

Many of the FCA’s 2024 proposals remain, but key changes include:

• Schemes will now be required to disclose expected net investment returns and annualised standard deviation (ASD) over the next 10 years for their default arrangements and each year-to-retirement (YTR) cohort. Advice must be obtained and considered on underlying assumptions from an independent third party and records kept for six years for audit purposes.
• There will be a simplification of some data requirements, such as the removal of 15-year data disclosures on investment performance, costs and charges and the need to separate out investment and service costs, other than for year one. Investment performance calculations will use arithmetic rather than geometric averages.
• The original service quality metrics will be streamlined to focus on accuracy and completeness of member data, timeliness and accuracy of core financial transactions, and complaints (volumes, resolution times, escalation rates). Engagement will be measured by a single metric: the percentage of savers who have nominated a beneficiary. Broader engagement measures will follow with further industry consultation and will be shaped by legislative developments, such as the new guided retirement provisions under the Bill and the FCA’s targeted support regime.
• Schemes will benchmark their VFM data against a wider commercial market comparator group rather than the originally proposed three comparator arrangements. This will be supported by a central VFM database designed to ensure data quality, enable consistent comparisons, and facilitate publication. Further details on the database, including accessibility, are under consideration; however, the intention is for the database to be operational in time for the launch of the new Framework.
• Schemes must attribute a Red, Amber, Light Green or Dark Green (RAGG) rating to each in-scope arrangement. The new light and dark green ratings represent value with room for improvement or clear outperformance, respectively. The intention is that the amber and light green ratings will align with the Bill’s ‘Intermediate’ category for trust-based schemes. Schemes with red rating will face stronger bulk transfer requirements if in members’ interests, with the expected introduction of contractual overrides under the Bill.
• Contract-based schemes will include their annual VFM assessment outcome in their Chair’s annual report. However, trust-based schemes will be required to produce a standalone VFM assessment report. The Government is considering legislative changes to the Chair’s statements to ensure that there is no duplication or overlap with the VFM framework requirements. It is not clear whether Chair’s statements will ultimately be ‘phased out’ as originally indicated by the Government in 2023.
• Schemes winding up or transferring all members will be exempt from VFM assessments, subject to certain conditions.

Responses will be shared with the Government, which will consult separately on draft regulations for trust-based schemes. TPR will also consult, where appropriate, on any necessary Codes of Practice or guidance. In parallel, the FCA is expected to undertake a further consultation before finalising its rules for contract-based schemes. All parties are working towards 2028 as the target date for the first VFM assessments.

Contacts

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Janine Bennett

Director

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Guy Winter

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