Regulation  

FCA caves in after pension charges disclosure confusion

FCA caves in after pension charges disclosure confusion

The Financial Conduct Authority has permitted pension providers to disclose their charges at scheme rather than employer level this year after widespread confusion about its requirements.

In a statement on its website published yesterday (May 3) the regulator said some workplace pension providers had told it that they were unclear what level of disclosure was required and had been preparing disclosures at registered scheme level, instead of employer level.

It reminded firms that it did not deem such disclosure helpful for promoting meaningful comparisons but admitted it had failed to specify this in its previous publications.

Therefore, it was making a concession for this year's reports.

It said: "Some firms have told us that they were unclear at what level disclosures were required and have been preparing disclosures at registered scheme level.

"As our [consultation paper] and [policy statement] didn’t specifically state that an employer level disclosure was expected, and considering the time remaining until the disclosures will be needed by IGCs, we don’t propose to take regulatory action against any firms that, for this reporting year, disclose each set of costs and charges that they levy (and the number of employer schemes which have these costs and charges), or show the distribution of costs and charges by employer arrangement in some other way, for example by dividing the range of charges into deciles (ie without also disclosing the relevant employer or scheme details against the particular costs and charges)."

It added: "In light of the approach taken by firms, we will consider if we need to consult on changes to our handbook to provide clarity and ensure consistent good outcomes. 

"We also plan to publish a policy statement in relation to CP20/9 in the summer, which will further clarify our expectations after we’ve considered the feedback."

The issue dates back to February 2019, when the regulator consulted on requirements for providers to publish costs and charges data but was faced with concerns from providers that it is underestimating the cost providers will face when disclosing charges to workplace pension scheme members.

Last year in February, the FCA made its final rules and met some of the industry's concerns when it agreed to restrict the new rules to default funds in the first year after admitting its implementation timetable was “very challenging”.

The rules came into effect from April 2020, and governance bodies, such as Independent Governance Committees and trustees, are now required to file their first reports on July 31, 2021.

However, the FCA said it has since encountered different views among stakeholders as to whether the data should be published at the level of the arrangement with each individual employer, or whether it should be published at a higher level, with the data indicating the range of charges paid by members in different employer arrangements in one overarching scheme.  

The City watchdog reiterated that it is seeking “to ensure that scheme members can find the information about costs and charges they require to establish that they receive good value for money from their pension scheme, and their pension scheme will meet their needs for future retirement.”