FCA clarifies pension provider costs and charges data expectations

The Financial Conduct Authority (FCA) has outlined its expectations on requirements for workplace personal pension scheme providers to publish costs and charges data, with plans to provide further clarity on value for money via a policy statement in the summer.

The FCA first consulted on the requirements in February 2019 and confirmed the final rules in February 2020, with the first publication of data expected this summer, when Independent Governance Committees (IGCs) publish their annual reports.

The regulator acknowledged, however, that there have been different views amongst stakeholders as to whether the data should be published at the level of the arrangement with each individual employer, or whether it should be published at a higher level, with the data indicating the range of charges paid by members in different employer arrangements in one overarching scheme.

In light of this, the FCA has confirmed that the approach of publishing at employer level aligns more closely with the aim for the rules, stating that firms must interpret every provision of the handbook in light of its purpose.

It noted that its consultation in June 2020 outlined rules as to how IGCs are expected to assess the value for money of workplace personal pension schemes and investment pathway solutions.

The consultation also addressed comparing costs and charges data, with the FCA stating that it was "confident" that IGCs will have access to data to conduct comparison once scheme governance bodies begin publishing cost information on their website.

Furthermore, whilst the FCA acknowledged that some stakeholders think costs and charges data should be published at the level of the overarching HMRC-registered scheme, it clarified that it does not consider that the aggregation of costs and charges at the level of an overarching scheme would promote meaningful comparisons.

Instead, it argued that comparisons at the employer level could play a “useful role” in helping to improve value for money in workplace pensions.

However, the regulator noted that it has received feedback from some firms that were unclear at what level disclosures were required, with some preparing disclosures at registered scheme level.

The regulator also acknowledged that the consultation and policy statement did not specifically state that an employer level disclosure was expected, confirming that given this, and the time remaining until disclosures will be needed by IGCs, it will not take regulatory action in some circumstances.

This includes regulatory action against firms that, for this reporting year, disclose each set of costs and charges that they levy (and the number of employer schemes which have these costs and charges).

It will also apply to those firms that show the distribution of costs and charges by employer arrangement in some other way, such as by dividing the range of charges into deciles.

In addition to this, the FCA confirmed that firms do not need to publish the information in the same document as the IGC’s annual report, acknowledging that this may result in a large document that is not user friendly.

Instead, a link can be included in the annual report, as the information must be available on a publicly accessible website.

In light of the feedback, the FCA has confirmed that it will consider if further consultation is needed on changes to its handbook, in order to provide further clarity and
ensure consistent good outcomes.

It also confirmed plans to publish a policy statement in relation to the previous consultation, Driving value for money in pensions, in the summer, which will further clarify its expectations.

The FCA stated: "We generally support an approach to comparisons that aggregates charges at the level of cohorts of similar employer arrangements, to the extent that such an approach would allow a participating IGC to compare its own provider’s individual employer arrangements with comparable arrangements at a cohort level, as well as enabling cohort to cohort comparisons.

"It will be for individual IGCs or Governance Advisory Arrangements (GAAs) to determine which approach, or combination of approaches, is most appropriate, and it is for IGCs to determine where best to focus their attention.

"In order that IGCs and GAAs have the option of employer level comparison though, the data must be publicly available."

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