Pension value-for-money assessments start with comparable data

At a Glance

The FCA is consulting on a value-for-money framework for workplace pensions that would require comparable assessments across contract and trust-based arrangements. MEMA's analysis is that the hardest part of the proposed framework is not producing another report: it is agreeing comparable data, governance judgements and escalation decisions that can withstand challenge across contract and trust-based arrangements.

CP26/25 proposes a consistent approach to assessing value for money in workplace pensions, building on earlier proposals and stakeholder feedback. The framework aims to shift industry competition towards better outcomes for savers, with larger schemes expected to begin assessments from 2028 subject to consultation outcomes and legislation.

The consultation highlights the operational challenge of producing comparable data across different pension structures. MEMA recommends that firms establish governance processes that can justify value judgements and escalation decisions when assessments fall short of benchmarks.

What CP26/25 would change

Cross-structure comparability challenge

The FCA proposes a framework that would require contract-based workplace pensions and trust-based schemes to assess value for money using consistent metrics. MEMA recommends that firms review their data collection and normalisation processes to prepare for potential 2028 implementation.

Governance-led assessment process

The consultation envisions value-for-money assessments as an ongoing governance activity rather than a one-off exercise. MEMA recommends that firms assess whether current governance frameworks can support evidence-based decision making at this frequency.

Phased implementation timeline

Subject to consultation outcomes, the FCA proposes that larger schemes including master trusts and multi-employer contract-based schemes would begin assessments from 2028, with full rollout by 2029. Firms should map their scheme characteristics against the proposed phasing to anticipate preparation timelines.

Who is likely to prepare first

The FCA says the consultation will be of most interest to workplace-pension providers, their Independent Governance Committees and Governance Advisory Arrangements, and trustees responsible for trust-based schemes. It identifies master trusts, large single-employer schemes and multi-employer contract-based schemes open to new employers as the expected first implementation group, subject to the consultation outcome and related legislation.

While the framework primarily targets pension providers and governance bodies, the FCA also invites feedback from scheme service providers, employers, consumer representatives and administrators. These groups may wish to respond to shape the final requirements that will affect their operational relationships with in-scope schemes, though they wouldn't directly conduct assessments.

The governance judgement behind the data

MEMA recommends boards commission a gap analysis comparing current data capabilities against the proposed framework's cross-scheme comparability requirements. Directors should challenge whether existing governance structures can accommodate the frequency and transparency of assessments envisaged in CP26/25, particularly how value judgements will be evidenced and challenged. The board's oversight role may need redefining to ensure it receives sufficient assurance about both data quality and governance process integrity.

MEMA's view is that boards should request scenario testing of how their organisation would handle value-for-money determinations where metrics conflict - for example, when low costs coincide with poor investment performance. This stress-testing exercise would reveal whether current governance frameworks can make consistent, defensible judgements across different value dimensions. Directors should also assess whether their scheme's characteristics position it for the proposed 2028 first-wave implementation or later phases.

Data and governance tests

MEMA recommends mapping current cost, charge, investment-performance and service-quality data to the proposed comparison fields. The review should identify where contract and trust-based arrangements use different definitions, who can resolve those differences and which administrator or provider dependencies could prevent a comparable output. The point is not to build a final return before the rules are made, but to expose the data decisions that governance bodies would otherwise meet too late.

Governance functions should prepare for more frequent evidence-based decision making about value. The proposed framework suggests assessments would feed into regular governance cycles rather than being annual compliance exercises. IGCs and trustees may need to enhance their documentation practices to show how qualitative judgements about value align with quantitative metrics and when they warrant intervention. Governance bodies face the challenge of establishing transparent decision-making frameworks that link quantitative metrics to qualitative value judgements. IGCs and trustees should pilot assessment methodologies to test how well their governance processes handle borderline cases where value determinations are not clear-cut.

Decisions Before the Consultation Closes

Source Evidence

Plain English Glossary

• CP - Consultation Paper. FCA publication setting out proposed rule changes and inviting feedback from industry and the public.

Disclaimer

This article is for general information only and does not constitute legal or regulatory advice. Firms should assess the application of regulatory requirements by reference to their permissions, products, customers and operating model.

How MEMA Can Help

MEMA can help firms translate regulatory change into practical controls, policies, monitoring activity and board evidence. Book a free scoping call to discuss what this development means for your firm.

MEMA helps firms apply regulatory developments through its pension regulatory change support.

Further reading: a related pension due-diligence control guide.