Getting Value for Money right will take plenty of time, consideration and collaboration. Making sure it’s communicated properly can’t be ignored.
This article originally appeared in Pensions Expert’s weekly Friday Takeaway email newsletter. To sign up, please register for free for our alerts.
The Value for Money regime currently being developed by the Financial Conduct Authority (FCA) and the Pensions Regulator is going to be crucial to ensuring good outcomes for members and a transparent, competitive and high-quality pensions sector.
As such, it was encouraging to attend an Association of British Insurers (ABI) event this week to find the FCA actively engaging with the industry – and industry representatives proactively and positively putting their views forward.
There is a long way to go and much work to be done to get this right, but so far all parties seem to be embracing the challenge to discuss the problems with the framework as currently proposed, and find ways to address them. Look out for more coverage on the Pensions Expert website.
Nike Trost, head of the FCA’s asset management and pensions policy department, told attendees that the framework was aimed primarily at industry professionals, and she did not expect consumers to pay much attention to it.
This is probably correct, but as at least one delegate pointed out, once the ‘red, amber, green’ ratings are made public, it will be very difficult to control how that information is used and understood.
As the framework currently stands, moving from ‘green’ to ‘amber’ would be a major hit to any provider and would likely be major national news, given the growing importance of defined contribution schemes to the future retirement prospects of the nation. In some quarters, this is known as “the Daily Mail risk” - in other words, how would this story look when reported in the Daily Mail?
Policymakers and those responsible for disseminating information about value for money need to be aware of this risk when finalising how the traffic light system will work in practice. Failure to manage information properly could inadvertently lead to the pensions sector’s equivalent of Northern Rock.
