The Financial Conduct Authority is consulting on proposals to determine value for money in workplace pensions to ensure members are getting the best possible result.

In a consultation paper, the regulator brought forward proposals to make it easier for both Independent Governance Committees and Governance Advisory Arrangements to compare pension products and services to determine whether members are being treated fairly.

The FCA proposed a simple framework for the annual assessment process, including a definition of value for money. It said the three key contributors to determining value were charges and costs, investment performance and quality of service.

There was also a proposed requirement for IGCs to compare their firm’s workplace schemes against other options on the market, which the FCA said would lead to “better and more consistent” value for money assessments across the workplace personal pensions market.

The FCA said it expects IGCs to challenge their pension provider on costs and charges to their clients and to flag any rival scheme that may be offering lower administration charges and transaction costs.

If the IGC is not satisfied with the governing body’s response, the relevant employer should be notified, it added.

IGCs oversee value for money at workplace personal pensions, including accumulation services and the investment pathways that will have to be offered from February 2021.

Alongside its consultation, which closes on September 24, the FCA has published a review looking at how IGCs and GAAs ensure members receive value for money.

It found while a number of IGCs were working well, a lack of consistency in the way they operate meant members of some workplace pension schemes may not be receiving the best outcomes.

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 at the FCA, 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.”