The Financial Conduct Authority (FCA) will consult on the rules for contract-based schemes in the new value for money (VFM) framework in the spring, the government has revealed.

In its Autumn Statement documents, the government said it welcomed the current trend of defined contribution (DC) pension consolidation and expected to see a market in which the vast majority of savers were in schemes of £30bn or more by 2030.

As part of the VFM framework, schemes will be required to compare themselves against others in the market, including large-scale schemes, to help ensure they are delivering value for their members.

“The FCA will consult on rules for contract-based schemes in spring 2024, working closely with the government and TPR for consistency with the development of legislative requirements for trust-based schemes,” the government noted.

“In the meantime, actions from The Pensions Regulator (TPR) will strengthen their existing supervisory approach.”

TPR has issued a new statement on VFM, which explained how the regulator was looking at options to embed the disciplines of the framework ahead of legislation.

"We are already engaging with schemes with assets of less than £100 million that are non-compliant with the value for members assessment requirements that came into force in 2021, testing the limits of our powers," TPR stated.

"Whilst some schemes have already decided to wind up as a result of our work, we will publish details of enforcement action taken, including penalties issued, when relevant legal process has concluded."

It stated that its objective, shared with the Department for Work and Pensions (DWP) and the FCA, was to develop a holistic framework capable of being applied consistently across the entire DC market.

The regulator is continuing its work with the FCA to help develop the authority's rules in anticipation of legislation for trust-based schemes.

TPR urged trust-based schemes to engage with the FCA's consultation to help remove barriers to implementing the VFM framework in the trust-based environment.

TPR interim director of regulatory policy, analysis and advice, Louise Davey, commented: “A VFM framework can only work if there is a level playing field across trust and contract-based pensions. That’s why we continue to work with the FCA to develop their rules in anticipation of legislation for trust-based schemes.

"We will continue to jointly engage the market and devise joint policy solutions and want trust-based schemes to engage with the FCA’s consultation. This will help ensure there are no barriers to implementing the framework for trust-based schemes.”

The government stated that it welcomed the FCA and TPR’s announcements on the next steps towards implementing the VFM framework in the DC workplace pensions market.

The DWP first launched a consultation on its proposed VFM framework in January 2023, which included a raft of DC measures that were developed in partnership with TPR and the FCA.

The government and regulators published their joint response to the consultation in July, revealing that the framework would be introduced in phases, although it did not include a specific timetable.

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