These proposals aim to make it easier for Independent Governance Committees (IGCs) and Governance Advisory Arrangements (GAAs) to compare the value for money of pension products and services, enabling them to be more effective in assessing value for pension scheme members.

Today also sees the publication of a review examining how IGCs and GAAs – which act in the interests of members of workplace personal pension schemes - ensure those members receive value for money.

It found that a number of IGCs are working well to provide value for money for their members.

However, a lack of consistency in the way IGCs and GAAs operate means that members of some workplace pension schemes may not be receiving value for money.

The review also found that:

• Some IGCs lack the necessary independence and were ineffective at challenging firms to ensure value for money for workplace pension scheme members;
• Those IGCs which maintained independence from the firms whose pension schemes they had responsibility for delivered better outcomes for pension scheme members;
• GAAs operated by third-party firms on behalf of pension providers were less effective at delivering meaningful improvements in value for money;

Over the period of the review (2017-2019), the FCA found there had been a small reduction in charges across all pension savings, although this cannot be directly linked to the work of IGCs and GAAs.

As a result of the review, the FCA has sent feedback letters to firms to ensure they make improvements to the way they work with their IGC or GAA.

Megan Butler, executive director of supervision, investment, wholesale and specialists, said: “This Consultation Paper will help to ensure that pension scheme members are getting value for money. Our separate review into IGCs and GAAs lays out the key lessons that need to be learned to ensure that workplace pension holders get a fair deal.

“The FCA has carefully considered these findings and is asking firms that do not meet our requirements to make improvements.”

The Consultation Paper, which has a deadline of 24 September, includes proposals to specify a simple framework for the annual IGC and GAA value for money assessment process, including a definition of value for money and three key elements of value for IGCs to use when conducting their assessments.

IGCs currently oversee the value for money of workplace personal pensions provided by firms like life insurers and some self-invested personal pension (SIPP) operators. They provide independent oversight of workplace personal pensions in accumulation (building up pension savings) and of the investment pathway solutions that will have to be offered from 1 February 2021.

IGCs act on behalf of consumers who are likely to be uninvolved or less engaged with their pension savings.