FCA consults on reforms to advice guidance boundary for pensions

As part of its Advice Guidance Boundary Review, the FCA is consulting on targeted support reforms for pensions.

The FCA identified a gap in the market between regulated, holistic advice to individuals at one end, and generic factual information available at the other. Following on from its discussion paper with the Treasury on better supporting a range of customers, it is now consulting on a new model of targeted support, which would see people receive suggestions developed for a group of similar consumers rather than based on the individual’s detailed circumstances.  This will therefore result in suggestions that are not optimised for the individual, but the FCA argues that a “trade-off” is required for pension support to be scalable.

Under the proposed framework, firms will pre-define scenarios to provide targeted support, and also relevant consumer segments (that is, groups of consumers with common characteristics) within scenarios to provide targeted support. There would then be a ready-made solution for firms to provide to all consumers in the same consumer segment. The framework would be underpinned by requiring the firm to have reasonable grounds for believing that the delivery of targeted support suggestions would deliver a better outcome for their customers than if targeted support was not provided.

The FCA intends to build part of the new framework on existing requirements, including the Consumer Duty. However, it also proposes to introduce some new requirements specific to giving targeted support, in order to:

• provide a framework within which firms could use information effectively to make a targeted support suggestion;
• define the process that a firm would need to follow to make any suggestions; and
• set out the steps a firm would need to take to monitor the outcomes of its targeted support.

The FCA is not yet consulting on new rules – given the significant change in direction, it is seeking initial feedback on the proposed direction, and expects to consult further on rules to create a new framework in summer 2025.

The consultation closes on 13 February 2025.