Overview
Introduction
The Financial Conduct Authority, Department for Work & Pensions and The Pension Regulator’s consultation on the Value for Money (VfM) Framework represents a significant evolution in how Defined Contribution workplace pension schemes will be assessed and compared. Fidelity International, alongside the Fidelity Master Trust Board and Independent Governance Committee (IGC), submitted a joint response which not only drew on our experience as a provider and administrator but also the wealth of experience within those two independent governance boards.
We have also engaged directly with regulators and government to ensure the framework is designed effectively as well as working closely with industry bodies and participating in cross‑industry meetings with competitors, government and regulators to help drive a practical and proportionate solution.
For trustees and employers, the emerging framework has important governance, operational and member‑outcome implications. This summary highlights what you need to know and how Fidelity is advocating for a balanced, workable model on your behalf.
What the VfM framework is trying to achieve
Fidelity supports the core objectives of the framework:
- Moving beyond a narrow focus on costs
- Prioritise long-term member outcomes, member experience and overall value
- Enabling consistent comparison across pension schemes
However, in its current form, the framework risks becoming an investment performance test, with service and engagement playing a limited role, and with ratings potentially triggering consequences that do not reflect genuine long-term value.
Key points from Fidelity’s consultation response
1. A dry run is essential
A formal testing phase is critical to avoid unintended consequences such as:
- Inaccurate or inconsistent scheme ratings
- Data comparability issues
- Operational strain due to evolving requirements
With final rules not expected until later in 2026, implementation timelines (e.g. January 2027 reporting) are simply not practical for the industry or regulators without a dry run. We feel a dry run is the only way to ensure trustees can confidently fulfil their obligations.
2. Rating labels must not distort trustee decisions
As drafted:
- Amber sits too close to red, creating cliff-edge consequences
- Multi-employer schemes would be disproportionately impacted
- Employers could face unnecessary pressure to act
Fidelity proposes that amber should reflect schemes delivering value overall, with defined areas for improvement within a two-year period.
This protects members, supports continuous improvement to ensure value is delivered which is the aim of the initiative and avoids unnecessary disruption to employers and scheme governance.
3. Service and engagement require greater emphasis
Value should extend beyond cost and investment performance to include:
- Service quality and administration
- Operational effectiveness
- Member engagement and retirement support
The removal of engagement metrics since the last consultation is a concern, as these factors materially influence outcomes, as member engagement is often a key driver of better outcomes, especially around new initiatives such as guided retirement. Yet, under current proposals, service can only reduce ratings, not improve them, undervaluing high-quality administration and member support offerings.
4. The framework must support innovation
There is a risk the framework may unintentionally drive:
- Benchmark tracking
- Reduced investment diversification
- “Herding” behaviours around a narrow range of investment assets
International experience (notably Australia) shows how this can drive meaningful opportunity costs for members. Trustees and employers increasingly seek innovative, diversified portfolios and the framework must not suppress that.
5. Realistic implementation timelines are critical
Effective delivery requires:
- Clear regulatory guidance
- Adequate lead times
- Robust systems and data processes
Without these, there is a real risk of misreporting and inconsistent application. Fidelity is calling for realistic timelines and clear operational expectations, so trustees and employers have absolute confidence in compliance. This again is where we have called for a dry run.
Our summary
Our response to the VfM consultation reflects our support for a shift from cost‑based assessments to a clearer focus on long‑term value. However, the framework risks becoming an investment performance test rather than a balanced evaluation of outcomes and service. A dry run and refinements to service metrics and rating definitions are essential to avoid unintended consequences and ensure consistent application. With the right adjustments, the framework can support innovation, avoid investment herding and ultimately deliver better long‑term outcomes for savers.
What this means for trustees and employers
1. Governance responsibilities may increase
Trustees will need to consider:
- More complex assessment frameworks
- Potential external advice requirements
- Increased documentation and evidencing requirements
2. Investment strategy reviews may become more frequent
Particularly if backward-looking performance metrics disproportionately influence ratings.
3. Service quality remains critical
Despite limited weighting in the framework, trustees and employers should continue prioritising member experience and engagement as key drivers of outcomes.
4. Scheme comparison will evolve
The introduction of a central VfM database will increase transparency and comparability to scheme data, subject to effective implementation and data consistency.
5. Ongoing support from Fidelity
Fidelity will:
- Provide guidance as final rules emerge
- Continue advocating for a proportionate and workable framework
Conclusion
The VfM framework has the potential to enhance transparency and improve member outcomes, but only if it is implemented proportionately, consistently and with full recognition of how workplace pension governance operates. Fidelity continues to work closely with regulators to ensure trustees and employers are equipped with a model that genuinely supports longterm value for members.
We will keep you updated as the proposals develop.