FCA consults on extending IGCs remit

The Financial Conduct Authority (FCA) is consulting on rules to extend the remit of Independent Governance Committees (IGC) to oversee the value for money of pension drawdown solutions.

Published today, 15 April, the regulator said it will also be looking mandatory for IGCs to report on the firm’s environmental, social and governance (ESG) issues as well as consumer concerns and stewardship.

In January, the FCA opened a consultation on plans to introduce investment pathways, as well as introducing new rules on wake-up packs in order to give consumers a range of investment solutions which will “broadly” meet their objectives.

The FCA said: “Our proposals are to help make sure that consumers with investment pathway solutions get good value for money.

“We proposed that providers must offer non-advised consumers entering drawdown a choice between four clear and prescribed objectives for what they want to do with their drawdown savings. For each of these objectives, larger drawdown providers must offer a single investment solution.”

In regards to the ESG reporting, the regulator said it expects IGCs to include the adequacy and quality of the companies’ policies on ESG issues in their annual reports, as well as how providers have responded to issues raised by IGCs.

“Our proposals are to help protect consumers from investments that may be unsuitable because of ESG risks including climate change, to help make sure that consumer concerns are taken into account, and to help encourage good stewardship of investments.

“This proposed guidance sets out how these firms should have regard to factors that can have an impact on financial returns, such as ESG risks and opportunities, and to non-financial consumer concerns, when making investment decisions on behalf of consumers.”

Currently, IGCs provide independent oversight of the value for money of workplace personal pensions, with a focus on accumulation.

The industry will have until 15 July to respond to the consultation, with the final rules likely to be implemented sometime in Q4 2019.

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