Industry experts have welcomed the idea for a value for money (VfM) framework in principle, although concerns have been raised around the "significant challenges" expected with its implementation.

The Department for Work and Pensions (DWP) previously shared plans for the framework, which was developed in partnership with The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA), as part of a raft of defined contribution (DC) measures.

Commenting in response to the plans, Aegon head of pensions, Kate Smith, applauded the collaborative approach that the government and regulators are taking to develop a value for money framework, warning however, that "this is easier said than done, as the consultation throws up many practical challenges".

In particular, Smith warned that whilst the framework is expected to be phased in, there are concerns that the proposed framework, even in the first stage, will be "excessively data heavy, and overly prescriptive with potentially the collection of 100s or even 1,000s of data sets, at enormous cost, but with little practical value to member outcomes".

"This is a massively ambitious undertaking and it’s important to avoid data overkill," she warned, arguing that the focus should be on what really matters to improve member outcomes.

She stated: "We strongly suggest that the government and regulators work closely with the pensions industry to agree which data sets are the most important to deliver value for money, starting with far fewer metrics and potentially expanding over time as the framework becomes embedded.

“Phase 1 of the framework rightly focuses on default arrangements with a professional audience, primarily trustees, Independent Governance Committees, providers and advisers but also, potentially, employers.

"It’s important this phase is future fit to allow for expansion to include other pensions and decumulation, but also for different audiences, specifically members. We therefore believe that the design of the framework shouldn’t be rushed or be over complex and that time is taken to get the design right with the focus on member outcomes, not simply to create data for data’s sake.”

Adding to this, Standard Life head of workplace proposition, Neil Hugh, described the proposed framework as a "huge opportunity to empower both pension professionals and savers", agreeing however, that its implementation does require "careful thought".

"For example, rather than a two-phase approach, we would recommend rolling out the framework over an extended period in a similarly staged way to the introduction of auto-enrolment," he suggested.

"Doing so would de-risk implementation while still ensuring that the most active parts of the market were brought into scope first."

In addition to this, Hugh suggested that more focus should be given is to assessing service and engagement metrics, arguing that the proposed metrics look at the lowest common denominator and "need to be brought into the 21st Century" to take account of digital journeys and broader financial wellbeing.

Hugh also warned that ensuring comparability of investment performance is one of the most complex areas, emphasising that care will need to be given to ensuring appropriate benchmarks are selected and in comparing performance at different stages of the saver’s journey.

LCP senior consultant, Tim Box, also highlighted the potential implementation issues, arguing that there are "significant challenges to overcome...before [the framework] can be successfully implemented".

"The framework must not simply be another layer of bureaucracy added to the already substantial compliance burden for pension schemes and we strongly believe that, with a bit of modification to the framework, this can replace the need for chair's statements which have become a millstone around the neck of DC pension schemes," he continued.

“We also have significant concerns about the proposals to compare investment performance net of member-borne costs and charges and all costs paid by an employer to a scheme or pension provider.

"We understand the principle behind this of ensuring comparison on a like-for-like basis by pension professionals but nevertheless we still believe this could be confusing for scheme members and potentially lead to them making poor decisions."

These concerns were shared by Hymans Robertson head of DC investment, Callum Stewart, who clarified that whilst the emphasis on net rather than gross performance was welcomed, "we would caution encouraging members or decision makers to make choices on the basis of this information".

He continued: "For example, we expect the last 5 years’ of returns will account for less than 5 per cent of a younger member’s retirement savings. Future (net) returns are expected to be a much more material driver of outcomes in retirement, even for older members.

"Therefore, continuing to encourage an emphasis on value and outcomes over cost will be welcome to meet the overriding ambition of improving retirement outcomes for savers across the UK. Perhaps the time has come to more actively discourage an emphasis on cost?

“We are encouraged that there is a willingness from the DWP, FCA and TPR to continue the engagement and deliver further enhancements to the approach for assessing value over time.

"For example, we would encourage the regulators to examine all stakeholder roles with influence over member outcomes (including advisors), and strengthen requirements to focus on value over cost."

More broadly, Stewart also called for the final response to result in "significant changes to the current requirements and a focus on outcomes and value, not cost".

"We are really impressed with the engagement and proactive nature of this consultation as a truly forward step in the right direction," he added.

"We eagerly await more details on the impact this will have within the DC pension marketplace, and welcome further engagements with the regulators to keep the momentum building towards a brighter future for savers as well as looking to a consideration of broader issues which also need to be reviewed to enable better outcomes.”

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