All defined contribution (DC) pension schemes need to get ready for the new value for money (VFM) framework.

Last month, the Financial Conduct Authority (FCA) launched its consultation for contract-based pension schemes. The FCA set out proposals for a VFM regime requiring pension providers to assess their pensions according to investment performance, quality of service and costs.

The consultation proposes publicly available red, amber or green ratings for DC schemes to improve long-term value. A red rating indicates that a provider’s arrangement offers poor value; amber says the arrangement provides adequate value but could do better; and a green rating means the arrangement delivers good value.