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Value for members

Code in force: 28 March 2024

  1. Unless exempt1, governing bodies of trust-based occupational pension schemes providing defined contribution (DC) benefits must, at least annually:
    1. calculate the charges, and as far as they can, the transaction costs borne by members’ funds
    2. assess the extent to which the charges and costs borne by members represent good value for members2 (VFM)
    3. explain their assessment of VFM in the annual chair’s statement3 and publish the explanation on a publicly accessible website. See also Chair’s statement.
  2. Hybrid schemes should consider VFM for their DC benefits alone, separately to any defined benefits they provide.
  3. Schemes with assets under £100m that have been operating for at least three years must carry out a more detailed value for members assessment at every scheme yearend after 31 December 2021. The governing bodies of these schemes must follow the statutory guidance on VFM assessments.
  4. Paragraphs 5 and 7 below describe how governing bodies not subject to the more detailed VFM assessment should assess, determine, and manage VFM.
  5. In assessing VFM, governing bodies should:
    1. Engage early with relevant parties, such as investment managers, administrators, and scheme advisers, and establish the lead in time required to provide information about charges and costs.
    2. Record any problems faced in obtaining the necessary information and the steps taken to resolve them.
    3. Document the evidence used to arrive at conclusions.
  6. In determining VFM governing bodies should:
    1. Make efforts to understand the characteristics of their members in a way that is proportionate to the scale, size, and resources of their scheme.
    2. Consider characteristics such as scheme member demographics and, where possible, their salary profile.
    3. Consider all available evidence when exercising judgement about what represents VFM. Remembering that VFM does not necessarily equate to ‘low cost’.
    4. Where direct member feedback is limited, consider what other methods can be used to assess VFM.
    5. Consider using publicly available industry research reports to compare their scheme to similar ones.
    6. Where the costs of a service are shared between members and employers (for example, through a rebate arrangement, or a proportional contribution from the employer, as opposed to a distinct division of cost) take into account all elements of services provided when carrying out their assessment and set out the basis of cost sharing in their explanation of the VFM assessment in the chair’s statement.
  7. Where governing bodies have identified areas of poor VFM, they may wish to consider the following actions:
    1. Document the issues identified, as well as the steps needed to improve VFM in those areas.
    2. Where it is not possible to improve VFM, document the reasons for this.
    3. Where they are unable to resolve matters leading to poor VFM, consider whether winding the scheme up is an appropriate action.
    4. Where the power to trigger winding up sits with the sponsoring employer, engaging with the employer regarding whether to wind up the scheme.
    5. Record the outcome of this consideration and review it at agreed intervals whilst poor value persists.

Legal references

1 Regulation 25(1) Occupational Pension Schemes (Scheme Administration) Regulations 1996 [Regulation 25(1) Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]. See the definition of ‘relevant scheme’ for the exemptions.

2 Regulation 25(1) Occupational Pension Schemes (Scheme Administration) Regulations 1996 [Regulation 25(1) Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]

3 Regulation 23(1)(c) Occupational Pension Schemes (Scheme Administration) Regulations 1996 [Regulation 25(1)(c) Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]