DC Value for Money
Robust VFM assessment for defined contribution pension schemes
All those involved with governing defined contribution (DC) pension schemes should assess the scheme they run on a regular basis to ensure it offers Value for Money (VFM). For trustees this is a regulatory requirement, for others it forms part of best practice.
A key part of the assessment is whether costs and charges borne by the members represent good value for them (Value for Member).
A scheme offers value for money where the costs and charges deducted from members provide good value in relation to the benefits and services they receive, when compared to other options available in the market. For instance, if your scheme has higher costs and charges it should offer improved benefits and services.’ The Pensions Regulator, April 2015
A VFM assessment needs to incorporate a wide range of areas and components to understand what members value most to know whether the scheme over all succeeds in offering ‘value’.
Both Absolute VFM (based on schemes own merits and benefits) and Relative VFM (comparing the scheme with its peers) needs to be reviewed under the assessment as both are of use to the trustees and company.
Below we highlight the step-by-step process we take in carrying out a VFM assessment.
Our report provides the independent assessment that trustees need to ensure their scheme provides both Value for Money and Value for Members and provides a clear list of action and priorities for trustees.