People’s Pension¹ has said the new Value for Money (VFM) regime has the potential to transform how savers engage with their pensions, making the point that the standardisation and publication of performance data will be a “gamechanger” in driving positive member behaviour and shifting competition towards value rather than cost.
Speaking at the Pensions UK Investment Conference in Edinburgh today², shortly after the closure of the FCA’s consultation on the new VFM framework³, Phil Butler, Deputy CIO of People’s Partnership, provider of People’s Pension, said the most significant innovation is not the individual VFM metrics, but the creation of a standardised, centralised dataset that will inevitably become consumer-facing.
Comparison and transparency will reshape behaviour
Butler said the publication of consistent performance data will open the door to widespread repurposing by third parties, including comparison sites for pensions, employee benefit consultants and the media.
“The real innovation here is that this information will be standardised and centralised,” he said after his session in Edinburgh. “Once that exists, comparison is inevitable. Third parties will use this data and push it directly to consumers. It’s not really a question of whether value for money becomes consumer-facing, it’s a question of how soon after launch.”
He added that the behavioural impact of transparent, comparable data could ultimately prove more significant than the technical design of the framework itself. This is supported by People’s Pension’s work with the Behavioural Insights Team⁴, which showed that the way value metrics are presented can materially influence pension decision-making.
“If done well, this regime will create a market where schemes compete on value, not just cost, and where savers are empowered to make more informed decisions.”
Urgent need to agree data standardisation
Butler warned that the industry has just 10 months to prepare for data collection and that agreeing a robust specification is critical. “The key issue here is data standardisation. We need to be collecting clean, comparable data next year and that is a significant operational challenge,” he said.
“If the industry cannot agree and implement a strong data specification, the averages generated by the central repository will not be reliable. That would make it harder to regulate effectively and could undermine confidence in the regime at the very moment it launches.”
A measured implementation is essential
He said the success of the regime will depend on careful implementation and close coordination between government, regulators and industry, particularly as performance data becomes publicly accessible.
“The publication of comparable data will change the dynamics of this market,” Butler said. “It’s too important to be shaped solely by commercial interests once it becomes consumer-facing. Regulators will need to take ownership of how these metrics are presented and understood.
“If we get this right, value for money will be a catalyst for better behaviour across the system, leading to increased transparency, informed savers and a market where schemes genuinely compete on value, not just headline charges.”
- People’s Pension is the largest commercial master trust in the UK based on members, serving seven million pension savers across the UK and managing more than £40bn in assets. It is provided by People’s Partnership, a business without shareholders, it reinvests its profits with the aim to help customers and achieve better financial outcomes for everyone. This assessment is determined by membership size. People’s Pension currently has more than seven million members, which, according to publicly available industry data, exceeds the membership of any other commercial master trust.
- Programme | Investment Conference | Pensions UK
- CP26/1: The Value for Money Framework: Response to consultation, further consultation and discussion paper | FCA
- New research confirms ‘Value for Money’ metrics can improve pension decisions – People’s Partnership
