The introduction of the value for money (VFM) framework could make it "too tempting" for pension providers to submit misleading data to avoid receiving poor ratings, People's Partnership CEO, Patrick Heath-Lay, has warned.

Speaking at the Pensions UK Annual Conference 2026, Heath-Lay raised concerns about the accuracy of information submitted under the proposed framework, suggesting that the prospect of receiving a red rating could incentivise providers to present their data in a more favourable light.

"I think our industry is used to dressing itself the way it wants to be seen," he said.

"In any provider selection process, we'll all turn up, and we'll all say our investment performance is the right investment performance and it's the best investment performance for any selection."

He argued that providers had historically been able to present information in ways that suited them, partly because the industry had not previously faced the same level of scrutiny.

However, he warned that introducing public VFM assessments could create new pressures around data reporting.

"Now that scrutiny is there, now the spotlight's going to be there, I think it's going to be too tempting," he warned, suggesting providers could submit incorrect information either accidentally or to influence their assessments and avoid a 'red' rating.

Heath-Lay also noted that the framework's implementation timetable was tight, with the risk of its current amber status slipping into red if key issues were not addressed.

In particular, he highlighted the need for consistent regulatory supervision and sufficiently clear data definitions to ensure providers were assessed on a comparable basis.

He also questioned how regulators would obtain sufficient assurances over the accuracy of information submitted by providers, particularly given the potential consequences of receiving unfavourable ratings.

Despite these concerns, Heath-Lay reiterated his support for the framework's objectives, arguing that greater transparency was essential to improving competition and outcomes for savers.

"Culturally we've got to walk into the light as an industry," he stated.

"And that, from a provider's perspective and for many in the industry, will be a very uncomfortable place to be, at least at the start."

The debate came as the industry prepares for the first VFM assessments in 2028, when larger schemes are expected to receive ratings without mandatory consequences, ahead of the framework's wider implementation in 2029.

Responding to concerns about the timetable, Financial Conduct Authority (FCA) director of cross-cutting policy and strategy, Charlotte Clark, acknowledged that the deadlines were demanding but maintained they were achievable.

Meanwhile, The Pensions Regulator (TPR) executive director for strategy, policy and analysis, Richard Knox, confirmed that work was progressing on the digital platform supporting the framework, with industry engagement and data validation central to its preparations.

He noted the regulator was working with the Department for Work and Pensions (DWP) to ensure the final regulations provided clarity, while a data dictionary would help schemes understand their reporting obligations.

He also confirmed that supervisory teams would scrutinise submitted information and engage directly with schemes to identify potential inconsistencies.

However, wider concerns were raised about whether the proposed VFM metrics adequately reflected the different objectives of pension schemes.

BNY head of UK workplace and senior vice president, Nico Aspinall, argued that the framework had moved away from its original focus on value and toward investment performance comparisons, potentially creating unintended consequences.

He warned that schemes adopting more cautious investment strategies to provide retirement income could receive poorer ratings than those pursuing higher equity exposure, despite delivering appropriate outcomes for members.

Concerns were also raised about how the framework treats private markets, particularly its reliance on forward-looking investment assumptions as schemes increase allocations to illiquid assets.

"As an actuary, I can tell you it's quite easy to play around with assumptions," Nico warned.

"It's quite easy to play around with the distribution of your assumptions and come out with the outcomes that you want."

He suggested that the approach could undermine trust if optimistic projections subsequently failed to materialise.

However, Knox stressed that consistent VFM metrics would provide an important baseline for assessing the impact of wider pension reforms, including changes to private markets investment, small pots consolidation and guided retirement.

The regulator acknowledged that the framework's initial metrics would not be perfect, but said that they would evolve over time as the industry adapted to the new requirements.

Meanwhile, Heath-Lay highlighted the importance of the Pound for Pound initiative in helping providers prepare for the framework.

The initiative's second phase is testing the proposed VFM metrics across 15 pension arrangements, covering approximately 31 million members and £220bn in investments.

He encouraged providers to participate and use the findings to identify areas for improvement, rather than focusing exclusively on achieving green ratings.

Heath-Lay argued that the initiative would also provide an opportunity to identify potential problems with the framework before implementation, allowing providers and regulators to address concerns early on.

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