Pension schemes must fix any customer vulnerability gaps as part of the Financial Conduct Authority’s (FCA) Consumer Duty before delivering the regulator’s new targeted support, MorganAsh has warned.

Targeted support is a way for providers to give affordable, tailored suggestions to groups of similar customers – such as simple product choices or actions – to help people access relevant financial support without needing full personalised advice.

However, the regime is underpinned by the Consumer Duty, introduced in 2023, which ensures businesses deliver good outcomes for consumers when they buy financial products.

Meeting the requirements for customer vulnerability management includes identifying, monitoring and demonstrating that vulnerable customers are receiving the right outcomes.

But MorganAsh said that many pension providers knew little about their customers beyond basic records.

MorganAsh financial inclusion commissioner and chairman, Johnny Timpson OBE, warned that the pension industry is "well off the pace" when it comes to customer vulnerability.

While providers and schemes have focused on training, communications and signposting, many still lack the quality data, interactive processes and oversight needed to properly identify and manage vulnerability across customer schemes.

"This is becoming increasingly critical as providers and schemes look to deliver targeted support at scale.

“Without that clear understanding of who their scheme members are, what circumstances they face and how they change over time, it will be extremely difficult to identify those membership segments – let alone whether targeted support is even relevant or that the right outcomes are actually being delivered.

"There’s no question that targeted support and its combination of scale, inclusion and low cost is hugely compelling.

"However, pension schemes need to get their house in order first and ensure they have a proper understanding of their membership base.”

MorganAsh argued that schemes and providers that rely solely on manual processes or frontline staff are unlikely to deliver targeted support effectively or at a viable cost.

They might also struggle to demonstrate whether it was working as intended or to avoid harm without consistent, objective data.

The support services provider recommended that organisations use the Chartered Insurance Institute’s (CII) new practical guidance on managing customer vulnerability.

"Effective vulnerability management is about more than regulatory compliance. It is about creating a fairer, more resilient system for all customers,” commented CII chief executive, Matthew Hill.

He added that by embedding the principles of the CII’s guide into culture and operations, organisations would meet the expectations of good practice and “contribute to the development of a sector that conscientiously strives to meet the needs of every customer”.

MorganAsh managing director, Andrew Gething, added that the CII’s guidance emphasised data infrastructure, monitoring and outcomes reporting.

Rather than just setting out processes, the guidance should be seen as a “blueprint for scalable and auditable vulnerability management”, Gething concluded.

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