FCA policy statement on regulated fees and levies and consultation on debt advice levy rates 

On 2 July the FCA published a Policy Statement on FCA regulated fees and levies for 2020/21.  Organisations funded by the fees and levies include FCA, Financial Ombudsman Service and Money and Pensions Service.  The Policy Statement affects all fee payers and includes the FCA's response to its consultation on the draft fees and levies rules.  Firms can use the FCA's online Fee Calculator to estimate the regulatory fees and levies they will need to pay.

On 5 August the FCA published a consultation paper "Debt Advice levy rates for 2020/21 – Additional Funding".  This is as a result of the FCA having been notified by the government that it must collect an additional £14.2 million for the Money and Pensions Service in 2020/21 for the provision of debt advice in England as a result of the Covid-19 crisis and £2.087 million to maintain debt advice capacity in Scotland, Wales and Northern Ireland.  The FCA has therefore consulted on the rates at which it proposes to charge levies to raise the additional funding.  The consultation closed on 30 September 2020.

Extension of SM&CR implementation periods for solo-regulated firms from 9 December 2020 until 31 March 2021

On 2 September, the FCA announced that the deadline for solo-regulated firms to have undertaken the first assessment of the fitness and propriety of their certified persons had been moved from 9 December 2020 to 31 March 2021.  The FCA also intends to extend to 31 March 2021 the date the Conduct Rules come into force for staff who are not Senior Managers or Certification Staff, and the deadline for submission of information about Directory Persons to the Register.

Consultation and thematic review on independent governance committees' value for money assessments

In June the FCA published a consultation paper and a thematic review on value for money (VfM) assessments carried out by independent governance committees.

Firms which offer workplace personal pensions in accumulation, such as life insurers and some SIPP operators, are currently required to have an Independent Governance Committee (IGC) (or in some cases a Governance Advisory Arrangement (GAA) for firms with fewer customers and less complex schemes).

In its consultation paper, the FCA proposes to introduce new requirements on workplace personal pensions providers to ensure their IGCs:

• take into account 3 key elements of value: charges and costs; investment performance; and services provided (including member communications);
• assess and report on VfM, in particular through comparison with some reasonably comparable options on the market;
• as far as they are able, to consider whether an alternative scheme would offer lower administration charges and transaction costs and inform the pension provider if so. If the IGC is unsatisfied with the pension provider’s response, the IGC should also inform the relevant employer;
• set out their overall assessment in their reports about whether the scheme or pathway investment provides value for money; and
• explain how they have assessed VfM in their reports and keep relevant evidence they relied upon for at least 6 years. 

The FCA also sought views on whether pension providers themselves should have a direct responsibility for VfM alongside the IGC.  The consultation closed on 24 September.  The FCA plans to publish its finalised Handbook text in a Policy Statement in Q4 2020. The FCA proposes that, subject to the outcome of the consultation process, the rules and guidance should come into effect 6 months after the 1st of the month following the date on which the final instrument is made by the FCA's board.

In its Thematic Review, the FCA sets out the findings of a review assessing the effectiveness of IGCs and GAAs in improving the VfM of workplace pensions for customers.  The FCA says it found a "mixed picture", with some IGCs having a positive impact on the outcomes members received.  However, it also found that some IGCs did not show sufficient independence from firms and failed to challenge them in areas where members might be at risk of receiving poor value for money.  It also found that GAAs were less effective than IGCs at delivering meaningful improvements in value for money for members.  The FCA's findings have been used to inform the proposals in its consultation paper.  The FCA says that firms and IGCs should review the examples of good and poor practice contained in its report and consider what actions they need to take to ensure they can assess and deliver VfM for all relevant members.  The FCA will be writing to workplace pension providers and IGC chairs asking for specific actions to be taken to address the failings identified.  For GAAs, the FCA will be considering whether it needs to make changes to its requirements in order to help ensure GAAs operate effectively in the interests of members.

FCA outlines plans on climate risk reporting requirements

In a letter to pensions minister Guy Opperman, the FCA has set out its plans to align its climate risk reporting requirements for FCA-regulated pension schemes and asset managers with those applicable to occupational pension schemes.  This follows publication by the government in August of a consultation containing proposals to require large occupational pension schemes and authorised master trusts to have effective strategies and targets for the assessment and management of "climate risks and opportunities" and to disclose these in line with the recommendations of the international industry-led Taskforce on Climate-related Financial Disclosures (TCFD).

The FCA says it intends to consult on implementing client-focused TCFD-aligned disclosures for asset managers and contract-based pension schemes in the first half of 2021.  Subject to consultation, it aims to finalise the rules by the end of 2021, with new obligations coming into force in 2022.  The FCA says it will consider phasing the obligations, beginning with the largest or most interconnected firms.

FCA survey of advisers involved in DB transfers

At the end of June it was widely reported that the FCA would shortly be sending a second questionnaire to all advice firms with defined benefit transfer permissions, requesting detailed figures relating the firm's clients, including the number of clients recommended to transfer, the number recommended not to transfer and the number allowed to proceed as insistent clients.  The FCA continues to be concerned that significant numbers of members are being advised to take transfers from DB schemes when it is not in their interests to do so.

FCA launches enhanced financial services register

On 27 July the FCA announced the launch of an enhanced Financial Services Register.  The register is intended to help consumers avoid scams by allowing them to see firms and approved individuals that are involved with regulated activities.  According to the FCA, key enhancements include:

• clearer navigation and design;
• simpler language;
• more information on the Register's purpose, how to use it and how to avoid scams;
• important information being made more prominent, including past actions against individuals and firms; and
• optimisation for some mobile devices.

Consultation on fair treatment of vulnerable customers

The FCA has consulted on updates to draft guidance for firms on the fair treatment of vulnerable customers, as well as discussing feedback received in response to its first guidance consultation which was carried out in 2019.  The FCA defines a vulnerable customer as someone who, due to their personal circumstances, is especially susceptible to harm.  Vulnerability may be due to health, capability, resilience, or the impact of a life event.

Updates made to the guidance since the first consultation include:

• updating the introduction to better explain the application of the guidance and how it relates to the FCA's Principles;
• refining the descriptions of what firms "should" do;
• moving some content to different sections in the interests of clarity and avoiding unnecessary repetition;
• replacing some examples and case studies where feedback highlighted that they were unclear or resulted in unintended interpretations; and
• adding content to highlight how the guidance is relevant to small firms, digital customer journeys and complex distribution chains.

Feedback statement on Intergenerational differences

In July 2020 the FCA published a Feedback Statement on intergenerational differences.  This follows its discussion paper on the subject in 2019.  The FCA's key conclusions are:

• consumers need better support to manage increased responsibility and additional exposure to risk;
• consumers need more hybrid and flexible products to meet their evolving needs;
• certain "consumer segments" cannot access lending products needed for their financial goals;
• consumers need access to better products to fund long-term care; and
• consumers may not have sufficient savings to meet future financial needs.

The FCA says it will apply these findings by using them as a way of measuring whether it has delivered its work priorities, and as a benchmark to reassess its understanding of intergenerational differences over time.  The FCA has concluded that it would not be appropriate to pursue bespoke remedies, including rule changes, in response to its findings.