CP26/1: The Value for Money Framework

By Mamunul Wahid

6 Mar 2026 7 min read

As part of our series exploring several of the FCA’s latest consultation papers, this article looks at “CP26/1: The Value for Money Framework” where the FCA updates its proposals on rules and guidance for the new value for money (VfM) framework in the context of workplace defined contribution (DC) pension schemes.

In this note we consider the latest VfM proposals and the impact on providers, trustees and employers. Pensions are typically the second-largest payroll cost for UK businesses, sitting just behind salaries. Yet while companies invest heavily in pay benchmarking to ensure competitive compensation, pensions are often not similarly scrutinised.

CP26/1 is a joint publication between the FCA and the Pensions Regulator (TPR) as it details proposals for how a VfM framework may be designed to work across DC contract-based and trust schemes. Contract-based DC schemes are regulated by the FCA whilst trust-based schemes are regulated by TPR.

It is worth noting TPR has published its own related guide which confirms “..the consultation [CP26/1] details proposals for how a VFM framework may be designed to work across DC trust and contract-based schemes” and has written a blog post encouraging trustees of trust-based schemes to respond to CP26/1.

Background

VfM has become an ever-increasing focus for the pensions industry over the last few years, with a new VfM framework having first been proposed under the previous government.

Back in 2024, the FCA published its initial consultation paper (CP24/16) on VfM for DC pension schemes. We considered this consultation paper previously. Since then, the Pension Schemes Bill, first laid in June 2025 and currently working its way through Parliament, includes powers to introduce the VfM framework for trust-based occupational DC schemes (with much of the detail to follow in regulations). We considered this development here.

CP26/1 is intended to:

Serve as the FCA’s response to its 2024 consultation;
Allow for a further consultation on rule and guidance updates in light of feedback received by the FCA; and
Serve as a discussion paper which would feed into the regulations that will set out the VfM requirements for trust-based schemes.

The consultation closes on 8 March 2026 with first VfM assessments under the FCA rules and equivalent DWP legislation targeted for 2028.

The updated VfM framework proposals

Scope

Included:

Workplace DC default and quasi-default arrangements operating for at least one calendar year where:
- ‘Default arrangements’ are those where contributions to an automatic enrolment (AE) scheme are invested without the employee having made an active choice.
- ‘quasi-default’ arrangements are those where a pre-AE arrangement of a workplace pension scheme is treated as akin to an AE default arrangement.

and either

have at least 1,000 members; or
- have less than 1000 members and is the sole default or quasi-default arrangement provided by a scheme; or
- have less than 1000 members and is not the sole default or quasi-default arrangement provided by a scheme but is the largest.

Excluded:

Small arrangements (fewer than 1000 members) that are one of multiple default or quasi-default arrangements for a scheme and not the main/largest one
Executive pension plans (“EPP”)
Small self-administered schemes
“Accidental workplace self-invested personal pensions (SIPP)” where two or more employees have chosen to join a SIPP without any employer involvement, but the SIPP would otherwise be deemed a “workplace” SIPP because the employer makes contributions to it

Metrics

Providers and trustees would need to disclose a range of metrics including:

backwards-looking and forwards-looking investment performance metrics;
costs and charges information;
quality of service merits; and
asset allocation table.

Consideration of forwards-looking investment performance metrics is new in this consultation. Schemes will need to set out expected net returns and risks over the next ten years. Schemes will be able to decide their own bespoke methodology and assumptions when calculating these metrics (tailored to the scheme's chosen investment strategy).

Guardrails apply to limit the risk of unrealistic or inflated metrics: (i) schemes will need to record, but not disclose, their assumptions; and (ii) they must also obtain and consider advice from an appropriate third-party on the reasonableness of the assumptions. It is not clear from the paper whether there are any consequences to a decision to depart from the advice, provided that the advice has been obtained and considered. This might weaken the protective value of the guardrail.

Central VfM database

Comparisons of value are to be made against a commercial market comparator group rather than three other schemes under previous consultation proposals.

This would be enabled by a central VfM database into which all scheme VfM data would be entered for the purposes of comparison and, potentially, publication.

Assessment and RAGG rating

There would be a four-point RAGG rating system (in place of the three-point system originally proposed). The four ratings will be:

Dark Green: arrangement is clearly outperforming those in the comparator group and there are minimal areas for improvements
Light Green: arrangement is delivering value, but there are areas that could/should be improved
Amber: arrangement is not delivering value but trustees must believe improvements are possible within three years to make the arrangement value for money
Red: arrangement is not delivering value and a bulk transfer should follow where this is in the best interests of members

Proposed actions for arrangements with an “amber” or “red” value rating

Schemes rated Amber or Red will be barred from taking on new business, and it is proposed that Red cases must transfer members elsewhere if that is in their best interests. This is a strengthening of the original proposals which were simply that a transfer had to be considered.

Amber rated schemes will be required to prepare and submit an improvement plan setting out how they will achieve a Green rating with specified timescales or set out other arrangements such as a transfer of members to a better value arrangement.

An arrangement assessed as Amber for three consecutive years will generally be required to be rated as Red the following year if it is still assessed as not providing value.

Implications for stakeholders

Employers

Employers will have a central role in the regime. The Regulators intend that schemes will provide them with the information to select arrangements that deliver long-term value, leading to better value pensions, without savers themselves having to act.
Employers in arrangements receiving Amber or Red outcomes should expect notification, possible closure to new business in multi‑employer contexts, and engagement on remediation plans or bulk transfers, with implications for payroll and communications.

Contract-based providers

CP26/1 crystallises a future in which standardised, public VfM data and market‑wide benchmarking will drive outcomes.
Preparations should prioritise data architecture and getting an annual process in place to collect, validate and submit standardised metrics across investment, charges, and service.

Trustees of occupational schemes

For trustees, equivalent obligations are on the way, with TPR encouraging early engagement.
If the scope of the definition of “regulated value for money schemes” and “regulated value for money arrangements” in the secondary legislation under the Pension Schemes Bill mirrors the proposed scope of the FCA rules, all master trusts and the majority of single employer DC schemes that are not an EPP or SSAS will be subject to the VfM requirements, regardless of size.
Trustees will need to consider how they can incorporate annual process to collect, validate and submit standardised metrics across investment, charges, and service. They may wish to undertake a ‘GAP’ analysis mapping existing data and reporting against proposed VfM metrics.
The Pension Schemes Bill includes a new statutory duty for trustees of DC schemes to design and offer one or more ‘default pension benefit solutions’ for members at the point of retirement. The consultation hints that the VfM framework might extend to cover these ‘default pension benefit solutions’.

Next steps

For contract based schemes: The consultation closes on 8 March 2026. Firms should review the updated proposals.
For trust based schemes: Given that the results of the FCA consultation will inform the shape of the equivalent DWP regulations for trust-based schemes, as referenced above, trustees were actively encouraged by TPR to respond to the FCA consultation. Following Royal Assent of the Pension Schemes Bill 2025, at this stage still expected this Spring, the next steps will include a consultation on the regulations, which is anticipated during 2026, depending on Parliamentary timetabling.
Timing - Under the Government’s timetable, the intention is that schemes will first be required to submit their VFM metrics in early 2028, with assessments later that year, and thereafter annually.

If you would like to discuss the points raised in this article please contact Mamunul Wahid, Alice Honeywill or your usual Burges Salmon contact.