In an open consultation published on 30 January 2023, the DWP, FCA and TPR invited views on a framework for measuring value for money for AE members of DC pension schemes.
Quote:
‘’DWP, the FCA and TPR are working together to develop a VFM framework and regulatory regime. This framework is intended to provide a standardised understanding of value via clear metrics, allowing more transparent comparisons to be made between pension schemes and driving more effective competition.’’
Does this sound familiar?
Although this consultation is primarily geared towards AE DC pension schemes and IGC trustees, do you recognise these words in the IFA world?
I see very clear similarities between both approaches and I don’t think it is a coincidence.
Can you hear an echo of consumer duty in this ‘open’ consultation?
The Consumer Principle (Principle 12) requires firms and advisers to ‘act to deliver good outcomes for retail customers’. In FG22-5 (final guidance on Principle 12), it goes on to say:
‘’Am I treating my customers as I would expect to be treated in their circumstances?…And further, ‘pro-actively act to deliver good outcomes for customers generally and put customers’ interests at the heart of their activities’
It’s the description of ‘’pro-actively act to deliver good outcomes’’ which resonates with me and the open consultation to ‘develop a value for money framework’, with the aim of having trustees of IGC to deliver against clear metrics to enable more transparency.
I see very clear similarities between both approaches and I don’t think it is a coincidence.
The FCA issued FG22-5 and they are also part of this open consultation. It’s a pincer movement in the pensions world. It’s a double-envelopment of both sides of the pensions world – retail and workplace pensions, both with the same aim of developing a clearer understanding of the service proposition, the products and the costs.
But, there is a critical difference.
On the one hand it is the responsibility of the firms and advisers to act under principle 12 and on the other, it is for the trustees to act on behalf of members to ensure value for money and transparency of metrics.
Whilst there are clear differences in where the responsibilities lie, in the retail IFA sector it is clear that principle 12 is overarching.
How do you deliver good outcomes and evidence this within the context of regulatory pensions advice, as an IFA?
You could start with going back to where this all started.
Within this paper you will see how the TPR (and you can take that as meaning the DWP, FCA and TPR) view the pensions landscape across the UK and how the two key DC/money purchase invested pensions segments are being ‘’managed’’.
Have a look here:
The three core elements of the TPR paper on VFM (value for money) are:
- Investment performance
- Consumer/member support
- Cost and charges
Compare that to the outcomes under principle 12, which are very similar:
- Product and service (Investment)
- Consumer understanding and Support
- Cost and fees
The direction of travel (of the pincer movement across the pensions landscape) is clear: every IFA firm will need a VFM proposition. You can see how the different parts of the landscape are being aligned and where expectations are being placed.
How do you build a VFM, aligned with principle 12, if you are an IFA firm?
Go and have a look at those across in the DC pensions world who have been working on this for the past 2-3 years – this will give you a good start in complying with principle 12.
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