FCA finds poor value in legacy unit-linked pensions products

The FCA has published a multi-firm review of Consumer Duty price and value practices in unit-linked pensions and savings.

Overall, the review found that unit-linked products deliver fair value, but customers holding legacy products were more likely to receive poorer value than those in newer products. This was often due to older product designs, multiple charges and limitations in firms’ data. The FCA called for firms to actively identify and address poor value in legacy books.

Examples of good practice included:

• Simplifying or rationalising unit-linked products and funds – successful firms balanced maintaining potentially valuable benefits in legacy products (such as guarantees) with ensuring customers could still benefit from features of newer products;
• Changing charging structures – some firms had made material reductions to charges for customers in legacy products, including introducing caps on annual management charges;
• Understanding the value of contract benefits;
• Considering whether differences in fees, charges or rates across comparable products were justified by differences in benefits; and
• Considering outcomes for different groups of customers, including those with characteristics of vulnerability.

Challenges identified to improving outcomes – and the FCA’s responses to these – included:

• Changing existing contracts – the Pensions Schemes Act 2026 contains provisions allowing providers to override or amend person scheme terms without the individual consent of members. These provisions only apply to workplace pensions, but providers general support extending the contractual override to non-workplace pensions – the FCA continues to engage with the Treasury and other stakeholders on whether any such extension would be possible;
• Caution around FOS decisions – the regulator confirmed that it would not see a firm making changes in good faith with a view to improving customer outcomes as evidence that legacy products did not provide fair value, and that the FOS would bear this in mind when reviewing complaints;
• Proactively contacting customers – the FCA urges firms to review its joint guidance with the ICO and Pensions Regulator when considering customer communications;
• Old administration systems – the FCA reminds firms that data and systems limitations do not remove firms’ Consumer Duty obligations. It expects that firms ensure they can access the data needed to monitor outcomes and evidence fair value on an ongoing basis, and to take timely and proportionate action to address any system-related issues;
• Gone-away customers with whom the firm has lost contact – the FCA reminds firms that they should take reasonable steps to reconnect with these customers, with good examples include industry-wide tracing initiatives. Again, inability to contact customers does not remove firms’ Consumer Duty obligations.