Helen Forrest Hall is chief strategy officer at the Pensions Management Institute
The latest of the Pensions Management Institute’s (PMI’s) regular columns looks at the promise and pitfalls of forward‑looking metrics, and why pragmatism, clarity and workable data solutions are essential for a system still in transition.
As the Department for Work and Pensions (DWP), Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) move closer to finalising a new value for money (VfM) framework, one thing is clear: this is a pivotal moment for the future of workplace pensions.
The Pensions Management Institute (PMI) is finalising our response to the current framework consultation and in this blog, I will share some of the themes shaping our thinking – and why this framework matters so profoundly for savers, schemes, and the long‑term health of the UK pensions system.
The ambition behind VfM is the right one. A consistent, comparable approach to VFM assessment has the potential to drive better long‑term outcomes. But ambition alone is not enough. The framework must work in practice, and it must work for the system we have today and for the future, ensuring innovation is not stifled.
Past performance vs future strategy
One of the most important challenges is how we judge schemes that have fundamentally changed their investment strategy. Basing VfM metrics on past performance risks penalising schemes that have done exactly what regulators have encouraged: modernising portfolios, increasing diversification, and exploring productive finance.
We cannot pretend this tension doesn't exist. A scheme that has overhauled its investment design may look poor on backward‑looking metrics, even when it is now better positioned for long‑term value. That is why the shift toward forward‑looking metrics is welcome – but it must be handled with care.
Forward‑looking metrics can help savers understand how schemes expect to perform in the future, and we support their inclusion. They should give a more meaningful indication of how schemes expect to perform for savers in the future. But they also introduce new risks.
Forecasts are not facts. They rely on assumptions, modelling choices, and judgement. It is right that regulators take a cautious approach, with strong checks and balances. TPR and the FCA must be ready to intervene where projections are unrealistic or where savers could be misled. Forward‑looking metrics can add value – but only if they are grounded, consistent, and subject to robust oversight.
Pragmatism must win out
We all agree that some way to measure and demonstrate value for money must exist. But we also need to be pragmatic. Schemes are already navigating dashboards, consolidation pressures, guided retirement developments, and a demanding regulatory roadmap. VfM cannot become another layer of complexity that overwhelms governance bodies or diverts resources away from improving member outcomes.
The framework must be proportionate, practical, and flexible enough to accommodate diverse investment strategies – including those that innovate and take a long‑term approach, which is the expectation for all well governed pension schemes.
The proposed VfM framework is suitable for today's landscape, but it needs to be introduced quickly, which, in itself, is in tension with how long it will realistically take to build a central database.
In a world of consolidation, regulators will increasingly be working with a dozen or so mega‑schemes. Value for money will be equally crucial in that future. But in that future state we will need a more sophisticated and comprehensive version that works for tomorrow's market.
We are not there yet. The gap between scale and value remains real. If VfM is to drive better outcomes, it must support schemes to improve, not simply funnel them toward consolidation by default.
The central database
The proposal for a centralised database is one of the most significant shifts in the consultation. In principle, it could make comparisons easier and more consistent. But in practice, we are being asked to sign up to an idea without knowing how it will work, who will run it, how it will be funded, or how schemes will interact with it.
The consultation does not go into much detail about how this would work in practice. Schemes are already thinking about data through the lens of Dashboards, but a central database raises urgent questions. Until these are answered, pragmatism must prevail, especially when it comes to the timing for implementation.
Next steps
Ultimately, VfM should reward long‑term thinking, encourage innovation, and give savers confidence that their money is working hard for them. That is the spirit in which we will be responding to the consultation – and the principle we will continue to champion.
Our response will include clear recommendations which are reflected in this article. And once the rules are finalised, we will provide training for schemes to help them meet new expectations and deliver for savers.
Helen Forrest Hall is chief strategy officer at the Pensions Management Institute
