From July 31, 2023, the FCA's Consumer Duty starts to take effect for firms regulated by the FCA.
Only firms conducting FCA-regulated activities in the UK are subject to the Duty, which means that most occupational scheme trustees are unlikely to be directly affected. An exception is where very large schemes have in-house investment teams that are subject to FCA regulation and provide investment services to the trustees. The new Duty will also introduce a new layer of protection for members whose benefits have been subject to a bulk purchase annuity exercise, as it apples to the insurers with whom trustees transact.
However, it is likely that managers of contract-based pensions will feel the impact of the Duty sooner than trustees of most occupational schemes.
Nevertheless, where trustees have appointed FCA-regulated firms to assist with running any aspect of the scheme, they should seek clarity on how the Duty will affect the service they are receiving. One area where the Duty is likely to bite is in the provision of investment advice, where the provider will have a duty to the scheme's members as the ultimate "retail customers". The FCA-regulated firm must consider how its product or service complies with the new requirements and adapt it if necessary.
Trustees will need to liaise with their FCA-regulated service providers and assess whether any changes are needed to their member communications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.