With over 16 million people in the UK saving into Defined Contribution (DC) pensions, the FCA wants to ensure pension funds are competitive on price and are delivering good long-term performance.
Historically, regulation has focused on reducing costs. The new Value for Money Framework (VFM) is a new initiative intended to deliver better retirement outcomes, marking a significant step toward improving transparency, comparability, and governance across pension schemes.
Why Does This Matter?
This framework aims to make pension arrangements more competitive and accountable, aligning with broader government efforts to consolidate and strengthen pension provision.
Key Proposals in the Consultation Paper
- Forward-Looking Metrics
In addition to historical performance, schemes must now incorporate forward-looking projections over the next 10 years for each arrangement. - VFM Database
A central VFM database will be created to allow easy comparison between different arrangements, improving fairness and transparency. Firms will be required to provide key facts about each arrangement, as well as any benefits or legacy features that would have an impact on value. Disclosure to the database will be required by 31st March each year for the previous calendar year. - Four-Tier Rating System
Moving from the previous Red-Amber-Green model to a four-point scale (including Light and Dark Green) to better differentiate top performers. Dark green ratings will only be given to those arrangements clearly outperforming all other arrangements. Arrangements not providing fair value must be categorised as amber or red, with ambers given to arrangements that are expected to deliver fair VFM within 3 years. - Costs and Charges Disclosures
Costs and charges data over 1, 3, 5 and, where reasonable, 10-year periods will need to be reported, however, firms only need to differentiate between service costs and investment charges in the 1-year reporting period. - Poor value arrangements
Where an arrangement offers poor value, this must be notified to regulators and employers currently paying contributions; the arrangement must close to new business, must submit action and improvement plans and must transfer savers to fair value arrangements when this is in their best interest.
What Does This Mean for Firms?
This framework will redefine how pension providers compete and report value for money. It’s no longer enough to report past performance. Firms must show credible forward-looking projections and provide clear, comparable data. The new central database will make ratings highly visible, so poor value could damage reputation and employer relationships.
How Can Thistle Initiatives Help?
At Thistle, our team of experts can help:
- Review and update your policies to meet the new requirements
- Support with regulatory returns and VFM disclosures
- Advise on steps to achieve a green rating and avoid amber or red
Meet the Expert
Melissa Buckingham, Compliance Consultant 
Melissa joined Thistle Initiatives in 2025, bringing with her a strong background in managing conflicts of interest and cross-border regulatory activity from her time at a Tier 1 bank.
With a deep understanding of both the regulatory landscape and operational pressures facing firms, Melissa adopts a thorough and detail-oriented approach to helping clients achieve and maintain compliance. She supports clients across a range of sectors, but primarily in the investments and wealth management space.