Patrick Luthi CEO at NOW: Pensions comments: "We welcome the FCA’s efforts to shift focus from purely cost and charges towards a more holistic view of value. As a pensions provider for over two million people in the UK, many of whom are on part-time or zero-hour contracts, delivering value for money is at the heart of our strategy. However, there are key concerns we believe must be addressed by the FCA to ensure the intended outcomes are realised. Firstly, we are concerned that a one-size-fits-all approach may not fully account for the market's diversity; without considering the specific needs of different market segments. There is a real risk of market distortion and reduced competition. Testing the impacts on specific segments of the market is critical to avoid unintended effects on arrangements that currently offer scale solutions and the greatest potential for future consolidation.
“Furthermore, we believe there needs to be a greater focus on risk-based regulation. In practice, this should include widening the scope of the framework to include both workplace and non-workplace pensions to reflect the varying risks and protections in these systems. But it is also crucial to understand, and before implementation, the extent to which further value can be driven by this framework, what the range of variance in performance actually is, and where the greatest divergence resides. We believe that process and metrics used in the consultation need more refinement. For example, the exclusion of forward-looking investment performance metrics could stifle innovation and deter investment in private markets. In addition, introducing a more nuanced assessment framework beyond the current three-tier RAG system will ensure the right balance between competition and regulatory oversight, protecting members while fostering market growth. We look forward to working with the FCA to ensure that the final framework reflects these considerations and delivers real value for pension savers.
“We believe it is therefore essential to undertake a one-off data gathering exercise before the full implementation of this framework, in order to address wider concerns. This would provide vital evidence of the extent of benefits, risks and potential detriment. Such data would not only offer key evidence to inform the final proposals, and test the metrics and framework delivery, but could also mitigate a number of significant unintended consequences. This would support the key policy aims of government and regulators, as well as offer more value for members.”
Yvonne Braun, Director of Long-Term Savings, Health and Protection said: “The Value for Money Framework could transform the workplace pensions market by driving a more holistic assessment of pension schemes for their overall value proposition, and improving the comparability of schemes. We fully support both aims as they should benefit savers. It will be crucial to further finesse the metrics to guard against duplicating the Consumer Duty, and to ensure the proposed red-amber-green ratings and their implications do not trigger market disruption. It is also very important that the framework is applied to the trust and contract-based market consistently and at the same time. We are looking forward to working with the FCA and the DWP on this.”
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