The industry “should be in no doubt” that the Financial Conduct Authority (FCA) will take an assertive approach when needed, FCA executive director, markets, Sarah Pritchard, has said, with "decisive action" to be expected on defined benefit (DB) transfer issues.

Speaking at the Pensions and Lifetime Savings Association (PLSA) Annual Conference 2021, Pritchard identified a more assertive approach as a future priority for the regulator, stating: “You should be in no doubt that we will be assertive when we need to be.

"Our aim is to make greater use of data in the future. Using our extensive and increasing data sources to identify issues before they cause serious harm. This will allow us to intervene earlier where we see things going wrong, and using all of our legal powers.”

Pritchard also acknowledged that consumers have suffered “serious harm” in recent years, most notably through DB transfers.

"We're taking decisive action to ensure that firms provide redress where they should, as well as seeking to act quickly to prevent harm in future,” she said.

In addition to becoming more assertive, the regulator has committed to becoming more innovative and adaptive, pledging to adapt the regulatory framework to “meet the evolving demands and learn from a fast accelerating industry”.

Pritchard explained: "We will look at where we can clarify and simplify regulations to deliver high standards in the most efficient way and working with others.

"Our regulatory framework will need to change to accommodate the growing focus on ESG across the financial sector, and to meet the societal challenge of achieving that zero.

"The pensions industry has an important role to play in active stewardship on climate change and other ESG matters. We will soon be publishing a refreshed ESG strategy in which the transition to a more sustainable future and the role of investor stewardship will feature prominently."

Diversity and Inclusion (D&I) was also identified as a “priority and an area where change is needed”, with Pritchard confirming that the FCA will expect the industry to make a “substantial or urgent effort to create a diverse pipeline of talent, and to consider the diversity of those who you invest with”.

“We're encouraging IGC’s and trustees to treat D&I with the same seriousness that you would treat investment risk and return,” she added.

Pritchard also confirmed that the regulator intends to establish a framework on a new long-term asset fund (LTAF) "before the end of the year” in order to support more long-term investing.

Commenting on this further in a written Q&A, Pritchard added: "There is an opportunity for pension schemes to invest more for the long term, but I agree that products have to meet pension saver needs and represent value for money. The structures have to work for pension fund investing.

"That's why we've recently consulted on proposals to introduce a LTAF. We are looking to introduce that framework by the end of the year."

Also in response to a written query, Pritchard confirmed that the regulator is still considering what more can be done in addition to a stronger nudge to encourage greater take up of guidance.

She wrote: “In our recent stronger nudge consultation we have consulted on the requirements to deliver the nudge at the point that people want to access or transfer their pensions for the purpose of decumulation, which is the requirement that parliament has legislated for. But we have also sought views on what more can be done, and whether a nudge could be delivered earlier.

“We are currently considering those responses. We are focused on maintaining a balance between choice and support but do believe that there would be benefit in nudging earlier as well as at the point of transfer.

“While there are some differences in how our and DWP rules operate, the aim is to increase the take up of Pension Wise guidance when consumers wish to access their pension.”

Pritchard welcomed the Taskforce on Pension Scheme Voting Implementation's recent report and stated that the FCA will “carefully consider its recommendations on matters such as voting transparency”.

“We agree with the taskforce that there's no regulatory barrier to pension schemes trustees issuing an expression of wish to their asset managers regarding their voting preferences, and no breach of funds rules where a fund manager takes the expression of wish into account when voting,” she said.

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