FCA to consult on value for money framework rules in spring 2024

The Financial Conduct Authority (FCA) has signalled that detailed rules for a new value for money framework for defined contribution (DC) workplace pensions will be consulted on in spring 2024, according to an analysis of the Autumn Statement papers published on 27 November 2023¹.

The statement from the regulator was issued alongside a raft of other pension policy papers and proposals published in the week of the Autumn Statement¹. The analysis notes that value for money "comes up everywhere" across the documents, including in a separate paper on pension trustee skills and culture, which encourages trustees to pursue value for money, though not necessarily the cheapest option¹. That paper also discusses the creation of a trustee register¹.

The Autumn Statement publications also included a document titled "Looking to the future: Greater member security and rebalancing risk", which combined several areas for discussion¹. Its first part set out the feedback the Department for Work and Pensions (DWP) received on an earlier small pots consultation, the government's response and next steps¹. Its second part was a call for evidence on the "pot for life" idea, rebranded in the Autumn Statement as "lifetime provider", as well as on how to grow the collective defined contribution (CDC) market¹. A separate paper addressed the regulatory approach to master trusts and provided a progress report five years on¹.

The analysis describes the overall package as "mostly all about pensions" as far as financial services is concerned, and notes references to several agencies including the DWP, the Treasury and The Pensions Regulator¹. It adds that consolidation is a recurring theme, with the government keen for larger schemes that are easier to manage¹.

Why it matters for households

The framework under consultation concerns defined contribution pensions, the type of workplace pension where the saver bears the investment risk and the outcome depends on contributions paid in and how the pot performs. Value for money rules would apply to how these schemes are assessed, which affects members of workplace schemes rather than people with defined benefit arrangements, where a promised income is set by a formula.

The analysis notes that value for money is being encouraged by trustees even where it does not mean the cheapest option¹, so the measures are not framed solely around cost. The consultation itself had not been published at the time of the analysis; the only timing given is spring 2024¹. No draft rules, thresholds or enforcement details are set out in the analysis, and none have been reported here.

The wider package of papers touches on consolidation of small pots and the "lifetime provider" idea¹, both of which concern how and where people's pension pots are held. The master trust paper is described as addressing the regulatory approach to master trusts and their role as a possible basis for default pension consolidators¹. The Pensions Regulator is among the bodies referenced across the papers¹.

What happens next

The FCA consultation on detailed rules for the value for money framework is signalled for spring 2024¹. The other papers published alongside the Autumn Statement, including the call for evidence on "lifetime provider" and the master trust paper, are described as proposals and discussion documents rather than final rules¹. No further dates are given in the analysis.