The Financial Conduct Authority (FCA) has met some of the industry’s concerns about its proposed new costs and charges regime for workplace pension schemes and agreed to restrict the new rules to default funds in the first year.
In a policy statement, published today, the FCA confirmed that its new rules surrounding the disclosure of costs and charges information on workplace pensions will be phased in gradually after admitting its implementation timetable was “very challenging”.
The rules come into effect from April 2020, but from January 1 to December 31 governance bodies such as Independent Governance Committees and trustees will only have to report on default funds, with a publication deadline of July 31, 2021.
For all subsequent years, information must be provided on all the investment options pension members are able to select.
The so-called Chair’s Statement will also only have to include costs and charges for default funds.
The Chair’s Statement is the document in which the defined contribution scheme trustees explain the actions they have taken to comply with certain obligations.
It must include information on the scheme’s default fund and its governance, the costs and charges applied, and the assessment of value for members, among other topics.
The FCA has also amended its Conduct of Business Sourcebook to clarify that IGCs “must ensure that information is communicated in a way that considers how members might reasonably use it”.
This came after some respondents argued the huge volume of data they would have to disclose would be difficult for members to fully digest and could cause inertia.
The FCA said it does not require illustrations for all available funds or options. “A representative range of funds/options can be provided,” it said.
Respondents also raised concerns over how much the new rules would cost, saying the regulator had underestimated the cost related to updating systems.
To speak to an adviser, contact us on 0191 384 1008.