New FCA/TPR “regulated advice” guidance: shades of grey

On 30 March 2021 the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) issued updated joint guidance for employers and trustees on “providing support with financial matters without needing to be subject to FCA regulation”.

The guidance doesn’t introduce any significant changes to practice. Regulated financial advice (or, how to make sure you are not providing it) is a well-trodden area for pension scheme trustees, and the guidance recognises that sponsoring employers and trustees are not generally in the business of arranging transactions or providing regulated advice to members.

However, the detailed commentary and examples clarify behaviours which could be considered as “arranging or advising” on transactions, and which would warrant FCA authorisation. In particular, this includes the previously “safe” acts of providing members with benefit illustrations or fictional examples of the decisions a member might make regarding his or her benefit options.

Financial advice or member support?

The immediate reaction to the guidance has been somewhat mixed; it does provide some useful commentary that, when worked through carefully, may help trustees and employers to assess and refresh the focus of member communications and statements. However, the subjectivity of the commentary has the potential to create continuing uncertainty about where the line is to be drawn between being helpful to members on the one hand and providing regulated financial advice on the other.

Broadly, the FCA / TPR’s views are that trustees and employers should not (unless they are FCA-authorised):

  • promote a particular financial product or transaction;
  • comment on the merits of choosing a particular retirement or benefit option over another;
  • imply a certain course of action is “right”. This extends to presenting scenarios showing “member X” making a particular decision about his or her benefits.
  • provide illustrations or transfer values without explaining the assumptions used, how the figures relate to scheme benefits, and signposting members to reliable sources of independent information.

Conversely, trustees and employers are permitted to:

  • provide factual information about financial products or options available within the scheme;
  • signpost members to publicly available factual information and tools on financial matters, e.g. the Money Advice Service and Pension Wise;
  • provide generic information that presents a balanced and factual view;
  • provide illustrations and transfer values – subject to the context and signposting explanations above.

The guidance also sets out four examples of practice and considerations which help to flesh out some of the greyer areas of the commentary.

What should trustees and employers be doing?

Although not set out in black and white terms, the subjective nature of the guidance acts as a reminder to trustees and employers that providing members with information about their retirement and benefit options remains a fine line to tread and, ultimately, caution needs to be exercised to ensure members can make informed decisions about financial matters.

Whilst the implication is not that trustees and employers are generally providing financial advice to members, this is a useful opportunity to consider communications afresh and to check that “how you say it” currently is not misleading or implicit as to financial advice or guidance.

Trustees and employers may therefore wish to review existing member communications and websites carefully against the new guidance on a case-by-case basis to ensure they fall on the right side of FCA / TPR expectations.

Please don’t hesitate to contact your Sackers team should you require any assistance in navigating the guidance.