Vahey said these metrics are squarely aimed at professionals who will have the knowledge and experience to view them in the context of running a pension scheme.
“The danger is pension customers view any league tables out of context and make poor decisions on the back of them,” she said.
"Having a common framework will push pension schemes to compare the value for money they offer their customers.
“This will hopefully encourage, or even shame schemes, into improving their offering to customers - whether that means better investment performance, lower charges, slicker service or a combination of everything.”
The regulators will also be invoking their own benchmarks for schemes to hit and any persistent underperformance will be punished.
The DWP proposes regulators are given new powers requiring any persistently poor performing schemes to wind up and consolidate.
"This is only the first step in the value for money journey,” Vahey said.
“Further phases of this work will develop a similar framework for retail customers, both when building up pension pots but also when taking income.
“However, in doing so, the FCA needs to be careful to not just roll out the same version. Measuring and comparing value for money for pension customers requires an entirely different approach so the figures make sense."
Costs and charges
The roll out of the framework will be completed in phases, the first of which will be aimed at default workplace pension schemes.
Future phases will extend VFM assessment to drawdown pensions, as well as non-workplace and self-select pensions.
The VFM assessments will be designed for trustees, providers and independent governance committees (IGCs) to test whether schemes offer value for money.
Assessments will have to be compared against other schemes' arrangements and where there is continued underperformance, regulators will be given the necessary power to intervene, removing persistently poor performing schemes.
The consultation outlined three key elements of the value for money framework: investment performance, costs and charges and quality of services.
The government said where a sponsoring employer undertakes to pay certain costs or charges of its workplace pension scheme on behalf of its employees, this has the effect of improving the apparent investment returns net of all charges.
Therefore, it is proposing that investment performance should be disclosed net of the sum of member-borne costs and charges and all costs paid by an employer to a scheme or pension provider.
This would allow comparisons of net investment performance to be carried out on a like-for-like basis.
However, in today’s publication, DWP said it proposed costs and charges to be captured within the VFM framework.
“We proposed to build on existing disclosures and limit new data to that necessary to enable comparison,” it said. “We proposed that schemes disclose total charges rather than ‘member borne’ charges.
