Value for Money (VFM)
VFM assessments for trust-based DC pension schemes
A VFM assessment could be seen simply as a tick-box compliance exercise. But if approached with the right spirit, it will provide you with a regular governance update on the suitability of your DC pension scheme arrangements.
You must report on your conclusions through the annual governance (chair's) statement, in online disclosures and, via the annual scheme return.
An interactive report that brings the VFM assessment to life
Our experienced DC pension consultants will provide you with both an absolute VFM assessment, considering the scheme on its own merits, and a relative VFM assessment, comparing the scheme against other options in the market.
Working in collaboration with you, we’ll present our findings using our interactive VFM module via our Governance, Engagement and Monitoring tool (GEM).
- Ability to quickly filter between those areas where VFM is being - and is not being – delivered (we will suggest changes for you to consider).
- Quickly identify areas in which the assessment has changed, compared to the previous year.
Our approach enables trustees to interrogate the analysis to help to determine what action might be taken following the assessment to improve the rating in future years.
In addition, you’ll be supported to help you prepare your chair’s statement and online disclosures, including the required illustrations of the compounding effect of costs and charges.
Our interactive VFM tool is designed to meet the statutory annual Value for Money assessment based on the regulations applying to smaller (‘specified’) schemes.
Our VFM tool brings the assessment to life, comprising a number of interactive dashboards that identify the key factors that add or detract value and give an understanding of the analysis and the rationale for the component and overall outcomes.
The assessment includes three components:
- Costs and charges
- Net investment returns
- Administration and governance
The first two components are relative assessments against three comparator schemes and the third is a self assessment across seven prescribed metrics.
The costs and charges and net returns for the scheme’s default arrangement must be compared with the average of those for the defaults of three comparator schemes.
In addition, the costs and charges and net returns for popular self-select funds must be compared with the average of those for comparable funds in the three comparator schemes (or the comparator schemes' defaults where there are no comparable funds).
We review the profile of your scheme when considering the comparator schemes to use.
We have a detailed scheme database and established links with the main DC providers in the market allowing us to identify the appropriate comparator schemes.
How can we help you?
We can help you understand and interrogate the analysis to help to determine what action might be taken following the assessment to improve the rating in future years.
We strongly believe there remains a place for smaller well-governed trust-based DC schemes and we can support you with relevant changes to help you to achieve and maintain this. However, should you wish to consider consolidation options, we are well-placed to support you and have experience of scheme transitions.
Please note, at time of writing, the DWP, TPR and FCA have a shared objective to develop a holistic Value for Money framework that can be applied across both trust and contract-based pensions.
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