Several pension organisations have broadly welcomed the Financial Conduct Authority’s (FCA) targeted support proposals, although concerns have been raised about regulatory clarity, alignment with other initiatives, and safeguards against misuse.

The consultation, launched in June, set out the FCA’s proposals to introduce target support, which will enable firms to provide suggestions designed for groups of consumers with common characteristics to help them make financial decisions. 

The Association of Professional Pension Trustees (APPT) said it is broadly supportive of the overall policy intent, and said that if it is "done well", targeted support will “improve outcomes for members and fill a significant advice gap in a cost-effective way”. 

However, it raised several areas of concern, including increased clarity on the approach and its goals, as simplified advice is an example of trying something similar without much success.

APPT noted that the “success” of the initiative will depend on the FCA and the Financial Ombudsman Service (FOS) being clear about their approach, as well as recognising that the goal is to provide a large volume of advice, even with limited understanding of customers, to influence most who wouldn’t pay for it.

The APPT also emphasised that enabling this “good enough rather than perfect” approach will depend on the FCA and FOS establishing “clear boundaries” and a balanced approach.

Quilter CEO, Steven Levin, echoed this and said that a key factor for success is creating a genuine safe harbour for firms providing targeted support.

He said that without “clear and consistent” alignment between the FCA and the FOS on how these journeys will be assessed, firms face the risk of hindsight regulation.

Levin stated: “This uncertainty can stifle innovation, limit access and deter firms from engaging fully. Safe harbour protection would give firms the confidence to innovate, make proportionate recommendations, and focus on good customer outcomes without fear of retrospective challenge.

“It is essential that the regulator sets out transparent assessment criteria so firms can operate with certainty from day one.”

Also, in terms of setting out clear expectations, the APPT highlighted the need for clarity between regulators, as there are “very limited” references to The Pensions Regulator working with the FCA on a consultation.

Given this, it suggested that the FCA will need to ensure there is a “joined-up approach” between the two to avoid regulatory confusion, inhibiting development of the approach.

The Society of Pension Professionals (SPP) also raised concerns over clarity in the proposals, but on the wording of what targeted support is setting out to achieve.

In particular, it said its members preferred the term “better position” rather than “better outcome” as it believes that this better describes the goals of targeted support, is easier to measure and reduces the potential for confusion with terminology already in place under the FCA’s Consumer Duty.

Additionally, the APPT suggested that care needed to be taken to ensure that, as other significant workstreams are developed, particularly guided retirement, these fit harmoniously with the targeted support framework. 

It stressed that although the direction of travel for the two is “broadly the same”, it will need attention to ensure they work together well.

Levin also emphasised the importance of targeted support “not working in isolation”, recommending that “it should form part of a broader ecosystem that includes greater access to financial education and reforms to disclosure rules, so they inform rather than intimidate”.

In particular, Levin said the regulator should ensure that any measures encourage participation rather than create “unnecessary barriers”.

“When paired with simplified advice, targeted support can create a more inclusive continuum of help for consumers, with each solution playing a distinct role without blurring regulatory boundaries.

“Together they can ensure people receive the right level of support at the right time, giving them the best chance of achieving their goals,” he said.

The APPT also highlighted the need for careful monitoring of implementation and the importance of addressing those who misuse the system.

At the same time, it stressed that the FCA should recognise that the system relies on a sensible overall approach to customer segmentation rather than a perfect understanding of each individual.

The APPT emphasised that the system “will not function effectively” if targeted support communications are full of “caveats and disclaimers” that disengage recipients.

The association also noted that there are areas for which targeted support will not be right.

In particular, it agreed with the suggested exception for annuities, but providers need to be able to suggest considering annuities in general, without recommending a specific product or provider.

However, the SPP argued that in some areas, the current proposals could limit the support available to consumers, potentially harming their interests - for example, in relation to decumulation and annuities.

The APPT also agreed with the proposals that providers shouldn’t be able to recommend combining pension pots into a specific product.

However, the SPP took an opposite stance, arguing that it took issue with this proposal as it was not clear why recommending consolidation into or out of a specific product for pension consolidation should be excluded from targeted support.

“In both the accumulation and decumulation phases, consolidation may be an integral piece of any suggestion to achieve a better outcome; the proposals to exclude targeted support in relation to consolidation also appear to be inconsistent with wider policy objectives to promote consolidation and encourage members to seek better value for money,” it said.

The APPT also emphasised that practical implementation will depend on who is authorised to provide targeted support.

APPT vice chair, Vassos Vassou, explained: “Since undertaking targeted support requires FCA authorisation, this will typically mean being a corporate entity.

“For master trusts, trustees could form a corporate entity to provide support, but given the scale of the task, it is likely they would leave this to the scheme funder. For sole employer DC trusts, only the largest are likely to consider this.”

Vassou added that regulations should allow trustees to subcontract targeted support to another party, as not doing so would disadvantage members compared to those in trusts or master trusts that can provide it.

The APPT also stressed that where trustees decide to leave provision to a corporate or subcontracted party, they will need to be clear to members by whom the targeted support is provided by.

It warned that the FCA should be mindful to be “clear on implications” for trustees, but should seek to avoid these, restricting current communications that trustees can make.

The SPP also further highlighted practical barriers to delivering targeted support, urging the FCA to distinguish clearly between existing authorised firms seeking to add targeted support to their permissions and firms applying for new authorisation to offer such support.

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