The FCA is to consult in the Spring on introducing a new ‘value for money’ requirement for defined contribution pension schemes.

The regulator will seek industry opinion on detailed rules for a new value for money (VFM) Framework for DC workplace pensions.

The move follows earlier joint papers with the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) on building a new framework.

The FCA said the VFM framework has been “deliberately designed” to shift the focus from cost to longer-term value and aims to ensure transparency and delivery of VFM in the market.

The watchdog said that ensuring fair value was a central expectation under the new Consumer Duty across firms’ product ranges, including master trusts.

The FCA said this week: “All pension savers need to be confident that their scheme delivers value regardless of where they’re invested. We know that short term cost can dominate decision making in the context of defined contribution (DC) schemes, and whilst cost matters investment choices also significantly impact consumer outcomes.”

The FCA is responsible for the regulation of contract-based defined contribution schemes and will work with the DWP and TPR to ensure a new framework is consistent across all DC schemes.

The three organisations have been conducting a series of industry working groups to ensure the proposals are well informed by, “the very best industry practice.”

Schemes will be required to test their propositions against others in the market to ensure they deliver long term value for savers, including those with the scale to invest in diversified investment strategies. 

The FCA's requirements on comparisons will also consider the latest evidence on the different potential benefits of scale.

The FCA says the consultation will be an opportunity for industry and other stakeholders to give their views and any feedback will be shared with DWP and TPR.