FCA Traffic Light Warnings on Poor Value For Money

The Financial Conduct Authority (FCA) has today unveiled a proposed new framework for workplace pension schemes designed to move the focus away from costs and charges to long term value for money.

In simple terms, you can have the cheapest tool set on the high street but if the tools do not work, it was and is not the value for money deal you thought you were getting.

The pension provider landscape has for too long focused on charges to attract workplace schemes to the detriment of the choice of funds, performance, contract options and flexibility i.e. long-term value for money has been ignored.

The FCA, the Department for Work and Pensions (DWP) and the Pensions Regulator (TPR) is implementing a joint framework for workplace defined contribution schemes.

The joint framework will include

• Provide greater transparency over how schemes are performing.
• Schemes will be compared on public metrics that demonstrate value – costs and charges, as well as investment performance and service quality.
• Traffic Light grades (sound familiar to our alerts?) with published ratings of red, amber or green.

Comment

The concept is good to give both the public and advisers an indicator of the value for money offered by the pension scheme but there is always a question of ‘who judges the judge?’ or ‘who regulates the regulator?’

That said, any move to stimulate under performers to do better is a good thing.