Marvin OnumonuThe Financial Conduct Authority (FCA) has launched its latest consultation on the Value for Money Framework for pensions.
Under the plans, pension schemes will need to show clear data on their performance, costs and service quality.
If a scheme offers poor value, firms and trustees must either improve it or move savers to better schemes.
The proposals focus on long-term value and follow last year’s consultation.
New measures will show what returns and risks savers can expect over the next decade.
The consultation is aimed at decision makers across the defined contribution market, including trustees.
Value for money assessments will use a colour rating system: dark green for strong performance, light green for good value, amber for improvement and red for poor value, making it easy to compare schemes.
Sarah Pritchard, deputy CEO at the FCA, said: “Good value isn’t just about low costs – it’s about strong performance, good service, and transparency.
“We want to see a focus on value. By working with the Government and The Pensions Regulator, we will help secure better returns for pension savers.”
Nausicaa Delfas, CEO at TPR, said: “Millions of people rely on pension income to support them through later life. We have to make sure they get value for their money.
“This framework will empower decision makers to either improve their scheme or consolidate out of the market.
“We want to hear the views of trustees to make sure we get this right and help transform pension saving for millions.”
Pensions Minister Torsten Bell, said: “It is simply too difficult for people to know whether their pension savings are working for them.
“That’s not right when we’re talking about something as important as people’s security in retirement.
“These proposals change that. Pension schemes’ performance will be public with a simple rating system.
“In future, savers will know if they are getting a good return or not.”
Bell added: “This is about being straight with people and making sure people’s savings work as hard as they did to earn them.”
The framework will also bring stronger governance with clearer expectations for trustees and providers.
When a scheme is not giving good value, steps will include closing it to new business and moving members to better-performing schemes.
The proposals are open for comment until 8th March 2026.
Reaction
Kirsten Pettigrew, senior financial planner at Rathbones:
“This is a welcome development. Auto-enrolment has been one of the UK’s greatest success stories in supporting retirement outcomes, but there remains a significant knowledge gap around what ‘good’ looks like.
“Many people rely entirely on their workplace pension to build a sufficient nest egg for a comfortable retirement, and as such there are high levels of inertia over how and where their pensions are invested. Sadly, many risk sleepwalking into subpar retirement provisions.
“Colour-coded value assessments is a novel and potentially effective way to make pensions information more accessible and help firms and trustees make better decisions on behalf of their often-passive scheme members. The key question, however, is what defines value in pensions.
“Since apples-to-apples comparisons aren’t always possible across schemes, it’s crucial that the value metrics are robust enough to separate the wheat from the chaff.
“The FCA is heading in the right direction in tackling retirement planning and these moves makes it clear that relying on a sluggish pension for a comfortable retirement is not enough, but greater financial education across all age groups is still needed to empower individuals to make decisions that suit their circumstances and plans, especially as responsibility for saving increasingly falls on individuals.”
David Brooks, head of policy at Broadstone:
“We welcome the FCA’s updated consultation on Value for Money, particularly its focus on streamlining service quality metrics.
“However, a real challenge will be agreeing what ‘good service’ actually looks like and how it should be measured in a way that’s fair, comparable and transparent.
“The FCA’s consultation makes clear that service quality must sit alongside performance and cost, but it stops short of defining a final metric set, leaving the industry to help shape it.
“A credible approach requires objective, measurable indicators rather than vague notions of ‘good administration’.
“The most realistic service quality framework could measure across four areas. Firstly, operational accuracy, ensuring contributions, switches, retirements, and other transactions are processed correctly. Secondly, timeliness, with core tasks delivered within agreed service levels, reflecting the FCA’s focus on outcome-based performance.
“Thirdly, complaint handling, tracking both the speed of resolution and the underlying causes of issues. And finally, member experience, ensuring communications are clear, services are accessible, and digital tools are engaging – all from the saver’s perspective as suggested by the FCA.
“To meaningfully compare schemes, these metrics should be standardised, publicly disclosed, and benchmarked across the market – just as costs and investment performance already are. Only with that level of consistency will VFM assessments reflect the true quality of the service members.
“Ultimately, any assessment of Value for Money must recognise the unique strengths different schemes bring to their members. We look forward to seeing the outcome of this consultation and support the continued effort to create a clear, consistent framework for assessing DC schemes.”
