LCP welcomes positive progress in latest VFM consultations but urges focus on proportionate, practical measures

LCP has welcomed the latest joint consultation from The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) on the Value for Money (VFM) framework, noting that several industry concerns raised during the previous consultation have been addressed.

However in a new blog, LCP also cautions that the success of the framework will ultimately depend on retaining a clear focus on proportionate, practical measures that genuinely improve member outcomes.

The updated FCA proposals build on the initial framework published in 2024, which aims to standardise how workplace pension schemes demonstrate they are delivering good value to savers. Key updates include:

A clearer, more informative rating system

•         The move from the original three tier “red/amber/green” model to a more nuanced four tier system is a positive step.

•         LCP previously called for this change, believing it will better differentiate between high performing schemes and those requiring intervention.

Greater recognition of forward-looking performance

•         Regulators have reconsidered their stance and now propose that forward-looking metrics sit alongside traditional backward looking data.

•         LCP strongly supports this shift, arguing that forward-looking expectations provide a more meaningful picture of how schemes are likely to perform for savers in the years ahead.

A new approach to comparison through a centralised database

•         Instead of requiring schemes to select and justify specific comparator schemes, the proposals now envisage comparisons drawn from a centralised industry database.

•         LCP thinks that this could streamline the process and reduce compliance burdens but warns that key questions remain around how the database will be funded, maintained and accessed by schemes.

Overall, LCP considers the latest proposals to be a constructive step forward—particularly in reducing administrative burden and strengthening the use of meaningful performance metrics. However, the firm warns that the framework must not become a tick box exercise and should remain firmly rooted in actions that drive better saver outcomes.

Lydia Fearn, Co-Head  of Consolidation at LCP, said: “It’s encouraging to see the regulators taking on board industry feedback and moving toward a framework that recognises both past performance and future expectations. Forward-looking metrics, in particular, will help schemes better understand how they are positioned to deliver strong outcomes for savers. As the framework evolves, it’s vital that the focus remains on practical, proportionate requirements that genuinely help improve member outcomes rather than adding unnecessary complexity.”

Tim Box, Principal in LCP’s Pension Research team, added:“The introduction of a more nuanced four tier rating system is a welcome step that should give schemes clearer signals about where improvements are needed. A centralised database could also streamline comparisons across the market, but it must be designed in a way that is accessible and efficient for schemes of all types and sizes. Ultimately, the success of the VFM framework will hinge on whether it enables meaningful assessments that drive long term value for members.”