VFM framework should mean scrapping of chair’s statements, which are a millstone around DC pension schemes’ neck - LCP

The Value for Money consultation closed this week. LCP believe that this framework means that the chair’s statements should now be scrapped.

Tim Box, Senior Consultant in LCP’s research team, said:

“We strongly support the introduction of a VFM framework in principle. However, there are significant challenges to overcome - as this consultation highlights - before it can be successfully implemented. The framework must not simply be another layer of bureaucracy added to the already substantial compliance burden for pension schemes, and we strongly believe that, with a bit of modification to the framework, this can replace the need for the chair’s statements which have become a millstone around the neck of DC pension schemes.

“We also have significant concerns about the proposals to compare investment performance net of member-borne costs and charges and all costs paid by an employer to a scheme or pension provider. We understand the principle behind this of ensuring comparison on a like-for-like basis by pension professionals, but nevertheless, we still believe this could be confusing for scheme members and potentially lead to them making poor decisions, such as opting out of an employer-sponsored scheme where they receive employer contributions and subsidies and instead joining personal pension with notionally better investment returns but which has higher charges which negate this apparently better return.”