The Society of Pension Professionals (SPP) has called for the development of consumer-facing value for money (VFM) ratings for pension schemes, arguing that the framework should evolve beyond a regulatory and governance tool to help savers make more informed decisions about their retirement savings.

In a new discussion paper, Helping Pension Savers Choose: VFM in Action, the SPP said the proposed VFM framework represented an important step in improving transparency and accountability across the pensions market, but warned that it was currently aimed primarily at trustees, independent governance committees (IGC) and regulators rather than consumers.

SPP Defined Contribution (DC) Committee deputy chair, Madalena Cain, warned that if the VFM framework was going to improve member outcomes then it couldn't be just a "technical reporting exercise" for the industry.

"Savers need information they can actually understand and use," she stressed.

“The challenge now is turning complex pension data into clear, meaningful signals that support both better decisions and better retirement outcomes. This paper should help stimulate debate and shape thinking as to how this could occur in practice.”

Indeed, the paper argued that if the ultimate objective of the framework is to improve member outcomes, a future phase should focus on translating complex VFM assessments into information that pension savers can easily understand and act upon.

It also highlighted concerns that existing disclosures, such as chair’s statements, have done little to improve member understanding or engagement with pensions, despite being in place for more than a decade.

For example, it pointed to a Department for Work and Pensions review which concluded there was little evidence that members knew such documents existed.

To address this, the SPP proposed the introduction of a simple consumer-facing rating system, either using an A-G letter grade similar to Energy Performance Certificates (EPC) or a numerical system comparable to food hygiene ratings.

These ratings could appear on annual statements, pensions dashboards, transfer journeys and marketing materials, giving savers a straightforward indication of how their scheme compares with others.

The proposed ratings would be based on a combination of outcome and experience measures, with greater weighting given to factors that directly influence retirement outcomes.

Suggested metrics include net investment returns, total charges, retirement readiness and support, communications and engagement, service quality, and governance standards.

The SPP also suggested that VFM information should be expressed in terms of expected retirement income rather than measures such as charges or investment performance.

For instance, schemes could be compared on the basis of expected annual retirement income generated per £100 saved, helping savers better understand the real-world impact of different pension arrangements.

In addition, the paper highlighted the role pensions dashboards could play in supporting informed decision-making.

The SPP argued that dashboards should incorporate consumer-facing VFM ratings and use them to support transfer and consolidation decisions, allowing savers to compare schemes side-by-side on a consistent basis.

However, the organisation also warned of the risk of “harmful switching”, where members transfer from higher-value workplace pensions into poorer-value arrangements.

To mitigate this, it suggested measures such as standardised VFM comparisons during transfers, warnings when moving from higher-rated to lower-rated schemes, and cooling-off periods for transfers that could result in significant detriment.

Finally, the SPP stressed that any move towards a consumer-facing framework should be phased, beginning with the establishment of robust and consistent VFM data before progressing to behavioural testing and the development of simplified consumer-friendly measures.

It noted that, over time, VFM indicators could become a central part of how savers engage with their pensions, helping to drive competition based on long-term value and improving retirement outcomes across the market.

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