FCA’s Value for Money Framework Gathers Pace

What happened?

The Financial Conduct Authority has published Consultation Paper CP26/1, representing the next phase of the proposed Value for Money (VFM) Framework for defined contribution (DC) pensions. Developed in partnership with the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR), the consultation responses are due by 8th March 2026.

CP26/1 proposes a standardized approach to assessing value, shifting the regulatory focus away from narrow, short-term cost-cutting and towards a holistic, long-term assessment of value generation, investment performance, and service quality.

Why does it matter?

This framework introduces a significant change in retirement outcomes oversight. Pension schemes will receive public, standardized RAGG (Red, Amber, Green, Dark Green) ratings. Where schemes are rated amber or red, providers must take swift corrective action or ultimately transfer members into better-performing arrangements.

For DC savers, who carry all investment risk themselves, small variances in long-term performance have a massive impact. This framework aligns directly with Consumer Duty, aiming to protect vulnerable or disengaged consumers who feel unprepared for retirement.

Who is affected?

This framework directly impacts Independent Governance Committees (IGCs), pension scheme trustees, asset managers, and providers of contract-based and trust-based DC schemes.

Key risks

• Public Red/Amber RAGG Ratings: Underperforming schemes facing reputational damage and the risk of being forced to transfer members.
• Accountability Pressures: Increased liability for trustees and IGCs as they are forced to exercise complex qualitative judgements on value.
• Regulatory Non-Compliance: Failing to establish comparable, standardised metrics across service quality and investment performance ahead of the legislative deadlines.

Actions to take

1. Engage with CP26/1: Review and respond to the consultation proposals before the 8th March 2026 deadline, participating in industry roundtables.
2. Audit Current Performance: Assess existing DC scheme charges, service standards, and long-term investment performance against the proposed standardised metrics.
3. Embed Consumer Duty: Integrate Consumer Duty outcomes and vulnerable customer metrics into existing pension governance frameworks.
4. Establish Governance Paths: Equip trustees and IGCs with the robust data infrastructure required to execute and document complex value judgements.

Wider implications

The framework marks a decisive legislative shift. While contract-based schemes are directly affected under final rules, trust-based schemes will be aligned through the Pensions Schemes Bill currently progressing through Parliament.

Recommendations

Providers should act now to build robust, auditable frameworks for monitoring customer outcomes. Seeking independent regulatory assurance will ensure schemes are positioned to secure dark green ratings and maintain trust.