The Pensions Regulator (TPR) has called for industry input on measures of service quality and forward-looking performance metrics to build out its Value for Money framework.
In a blog post, Nina Blackett, interim executive director of strategy, policy and analysis at TPR, said the proposed framework could have “as big an impact on pensions as auto-enrolment did”.
The regulator – which is working on the framework in partnership with the Financial Conduct Authority (FCA) – has urged master trusts and large single-employer defined contribution (DC) schemes to engage early with the framework and give feedback on its practicality.
“Pension scheme trustees are experts on their schemes and their members,” Blackett said. “We’d urge those responding to the consultation to tell us what they need to make the best decisions for their savers, bearing in mind that the framework needs to work across the whole DC landscape.”
She acknowledged that measuring value was a “complex” concept, which is why the regulators were particularly keen to encourage engagement with the consultation.
In particular, TPR and the FCA have called for input on quality-of-service measurements.
Blackett said: “This area has been challenging because of the many factors involved; the nature of service and the value it provides will be different across different demographics. So, we really want to know what metrics clearly demonstrate better outcomes for savers.”
The consultation paper, published earlier this month, proposed metrics including transaction security, efficiency and accuracy; user satisfaction; support for decision-making; ease of use; and engagement.
Forward-looking metrics
Several industry commentators lamented the absence of forward-looking metrics in the original consultation.
Steve Watson, director of policy and research at the NatWest Cushon master trust, said earlier this month: “To not include them may push schemes away from those productive UK assets the government wants pensions to pursue and again drive pensions towards a middle ground.
“We recognise the risk with forward-looking metrics, but… there are ways around those potential issues.”
Such measurements were initially excluded due to concerns that they could prove overly complex or introduce “gaming” risks. However, the regulators have urged people to put forward proposals for such measurements.
Blackett said TPR and the FCA were “keen to understand how these could be avoided and to understand if trustees use forecasts of expected returns to guide their decision-making”.
“We also urge trustees to consider the areas where we will need to update metrics on an ongoing basis to keep up with shifts in the economy, technological evolution and changing saver needs,” she added.
The consultation is open until 17 October 2024 and can be accessed on the FCA’s website.
Further reading
Regulators propose ‘red-amber-green’ Value for Money framework (8 August 2024)
Industry casts doubt on elements of Value for Money framework (8 August 2024)
Smaller DC schemes urged to swot up on value for money assessments (5 July 2023)
Poor performing schemes to face new business ban (4 March 2024)
