Consultation Responses

Background

On 30 June 2025, the FCA published a consultation on its proposed regulatory framework for “targeted support”.  The consultation also sets out the FCA’s “early thinking and its direction of travel” on simplified advice and clarifying the Advice Guidance Boundary.

General comments

We welcome and support the work undertaken by the FCA in this area and believe that the proposals provide a good basis for FCA authorised providers to provide more effective support to members. We strongly agree that –

• consumers need greater access to pension support to avoid poor outcomes, such as under-saving for retirement and/or poorly informed decumulation decisions
• additional pension support should be provided free of charge for the consumer where that is possible, because many people are unwilling or unable to pay for advice. It should also be provided on an “opt-out” basis to maximise take-up
• “ready-made suggestions” which are developed for a group of similar consumers, rather than each individual’s detailed circumstances, would be a helpful way forward
• it is important for the policy intention to tackle grey areas that encourage a risk-averse approach to retirement support, which can be a significant constraint on the kind of help that is provided to consumers
• it would be helpful to improve existing guidance on the boundary between the provision of information/guidance and advice, including in respect of trustees of occupational pension schemes (ie the existing TPR/FCA joint guidance on providing financial support).

Rather than responding to specific questions, we offer our commentary on several key areas which will need further consideration.

Occupational pension scheme trustee perspective

We have looked at the proposals from the perspective of occupational pension scheme (“OPS”) trustees. Noting this includes master trusts, which are at the forefront of government initiatives for scheme consolidation, we are keen to support the industry in ensuring the targeted support proposals work as effectively for these schemes as they would for contract-based arrangements.

The consultation envisages that OPS trustees may wish to provide targeted support or a version of it. We agree, therefore, that it is important for the FCA to continue working with TPR and the DWP to consider the scope of targeted support from the trustee perspective. We say this because some of the concepts and language used in the proposals will not transpose easily into an OPS context and may need adjustment or clarification. For example, requiring trustees to show there is a “better outcome” for members as a result of offering targeted support and considerations regarding the interplay with the Consumer Duty (see paragraphs 2.22 to 2.26) do not sit easily within the OPS framework.

Forms of targeted support

Also, paragraph 2.37 notes that the proposals “do not involve the regulation of an activity that is not regulated today”. OPS trustees will be looking for reassurance that paragraph 2.7 is intended to offer comfort to trustees as well as to FCA-regulated firms. Anything that could or would push OPS trustees outside the scope of their exemption from FCA-regulated activity may affect trustee behaviour and undermine the policy intent of supporting consumer decision-making.

Under the current proposals, targeted support which relates to regulated investments would be a regulated activity that requires FCA authorisation (under new Article 55A). In practice, few, if any, OPS trustees are FCA-authorised, and we consider it unlikely that trustees would seek authorisation so that they could provide targeted support relating to regulated investments. Even if they were willing to do so, many may not be able to meet the FCA’s requirements.

If the provision of targeted support by OPS trustees is limited to “in-scheme” benefits/investments (as appears to be the suggestion in the consultation), or benefits in other OPSs (eg master trusts), as these are not FCA-regulated investments, this would appear to mean such targeted support would not be a regulated activity or constitute a financial promotion.

However, if the provision of targeted support by OPS trustees extends to regulated investments (eg retirement solutions in personal pension schemes, drawdown products offered by firms or annuities) then it would appear this form of targeted support would fall within the new regulated activity. Currently in the decumulation space, for most single employer trust schemes, decumulation solutions are not provided “in-scheme” and, even in the master trust space, decumulation solutions often incorporate products outside of the master trust (eg annuities).

Consequently, it is unlikely that trustees will be in a position to provide targeted support in respect of investments held outside of an OPS in its current proposed form directly. Instead, they would either need to deliver such support in partnership with an FCA-regulated firm (see below for further discussion) or there would need to be an express exemption that prevents such activity from being a regulated activity where the support is offered by trustees through an OPS.

To help address the above, it would be useful if the FCA could provide further clarity on the expected role of OPS trustees in relation to targeted support.

Trust law duty vs contractual duty

There is an inherent tension between the duties imposed on trustees under trust law and the expectations surrounding the provision of targeted support. Trustees have a fiduciary duty to act in the best interests of scheme members as a whole and to act for the proper purpose of the scheme (the provision of pension benefits). They do not have a contractual relationship with each member.

By contrast, targeted support is designed to help consumers achieve “better outcomes” than if they had not received such assistance. To deliver targeted support in a certain scenario, a firm should have reasonable grounds for believing this will be the case. This is a different threshold than the fiduciary obligation to act in members’ interests.

While we appreciate that the consumer should understand the nature of the recommendation they are receiving, ie that it is not based on their personal circumstances, we consider this disparity would create a significant risk of liability for trustees. While targeted support may achieve “better outcomes” overall, there will inevitably be cases where an individual member receives and acts on a ready-made suggestion (possibly via a partnered FCA-regulated firm) that does not result in a better outcome or may even lead to detriment. If the trustees held information indicating that the suggestion might be unsuitable for that member, a legal claim against the trustees could potentially arise. Ideally, where targeted support is not provided directly by the OPS trustees they would be protected from liability, and it would be clear that claims could only be brought against the relevant FCA-regulated firm.

The provision of targeted support is also based on information that is held about the consumer. As trustees do not generally have a duty to consider members’ wider financial or personal circumstances they will not necessarily have all the relevant information, and to obtain that information and act on it could be deemed to be beyond their remit (noting the proposed extension of this duty under the new default pension benefit solutions (“DPBS”) framework, also known as “guided retirement”).

Interplay between targeted support and guided retirement

The consultation notes the parallel workstream on guided retirement for trust-based schemes, which aims to ensure that DPBS are made available for consumers who do not, or cannot, engage with their pension (see pages 23/24). We are supportive of the government’s proposals in this space and our comments here are intended to assist the FCA with continuing to ensure that these two policy initiatives sit in harmony alongside each other as they are developed by government and the industry.

Although the details on guided retirement remain limited at this point, we anticipate there will be some overlap between the targeted support framework and DPBS in certain circumstances.

As a starting point, looking at the two proposals at a holistic level, it would be problematic if an individual member of a pension scheme received a “ready-made suggestion” under targeted support that later conflicted with the DPBS allocated to them under guided retirement. Any targeted support and DPBS offered within the same pension scheme will need to be aligned.

We also note under the new DPBS framework:

• the requirement for trustees to design a DPBS solution based on the needs and interests and circumstances of members or subsets of members
• trustees may be required to request information from members to determine which DPBS may be appropriate for them, including information about their financial circumstances or plans for retirement
• the requirement for trustees to send members a communication which sets out the trustees’ opinion as to what the circumstances of a person might be for whom the DPBS may be suitable seems similar to what is proposed under the targeted support regime
• trustees may be required (where they are providing the DPBS in-scheme) to inform members if they consider that the rate of decumulation should be reviewed.

These are some of the key areas that seem to require trustees to go much further than their current duties and to do something very similar to what is proposed under the FCA targeted support regime in terms of identifying relevant cohorts of members based on information about the members, designing solutions based on these cohorts and making members aware that these solutions may be appropriate for them. Clarity will be needed as to whether what is proposed by the new DPBS framework will constitute “guidance” or whether the intention is that this is a form of targeted support to be offered by trustees.

We have also observed some inconsistencies in approach which we expect that the government and FCA will want to address to ensure alignment across the industry. For instance, under the proposed DPBS model, DC trustees may place eligible members into a DPBS to provide a “regular income” – potentially an annuity from a specific provider – whereas targeted support is not deemed a suitable framework for recommending specific annuity products to consumers. The FCA considers that “without personalised data, it would be inappropriate for firms to make an express recommendation for a lifelong product that is irreversible.” If that logic were also extended to OPSs it would make it similarly inappropriate for OPS trustees, who are typically not FCA-regulated, to make such decisions on behalf of members. This potential misalignment of the two policies will need to be resolved if the targeted support regime and guided retirement regimes are to work together effectively.

Targeted support via partnership with an FCA-regulated firm

As discussed above, OPS trustees are not typically FCA-authorised and therefore they would not be able to provide targeted support (in its currently proposed form) themselves in respect of any FCA regulated investments. In practice, any provision of targeted support in its current proposed form in the trust-based environment would need to be delivered through a partnership with an FCA-regulated firm. This would also help reduce risk and liability for trustees, which is something they are likely to be very concerned about. This model, however, raises several practical and legal challenges:

• Practicalities: Some aspects of targeted support will be pro-active (suggestions to “do” something, provided in advance). For example, directing members to certain retirement solutions based on their circumstances or warning members they are not saving enough for retirement. These lend themselves to provision by a third-party, as they can be anticipated. But some aspects of targeted support will be reactive, such as responding to members who ask to cash out all of their benefits from the scheme. Reactive support may be more difficult for trustees to manage, because they would be attempting to insert a third party into the dialogue with the member at a point in time when it is unlikely to be welcomed (as the member has made their decision). Trying to activate member engagement in those circumstances may not be easy.
• Ownership and Use of Data: In trust-based schemes, the relevant data belongs to the trustees rather than the FCA-regulated partner. This raises issues around data sharing and compliance with direct marketing rules. Further guidance would be needed to ensure roles and responsibilities around data usage are clear.
• Responsibility and clarity of role: In contract-based schemes, the same entity will likely serve as both the scheme provider and the provider of the targeted support. This would not be the case for trust-based schemes. As a result, members may be unclear about who is providing the support – the trustees or a third-party partner – raising concerns around transparency and accountability. In master trusts there may also be confusion if the provision of targeted support appears seamless to the member, ie it looks like it is coming from the trustees but is actually being provided by an appropriate firm within the master trust provider’s group, or a third-party partner. Looking forwards, if AI might decide which individuals belong within consumer segments, it will be important to know “who” is designing that route, whether that is the firm/trustees, the administrator or the software being used. This is important both from a “control” perspective (ie who decides what should happen), and from a “liability” perspective (ie who is responsible if something goes wrong).
• Absence of a contractual relationship: A key issue is that members may not have a direct contractual relationship with the FCA-regulated firm delivering the support. This creates two main complications:
  • Liability: Without a contract between the member and the FCA-regulated firm, any claims or disputes may fall back on the trustees, increasing their legal exposure.
  • Data protection: The absence of a contractual relationship complicates the lawful processing of personal data; there would need to be a legitimate interest for doing so.

Usually in the trust-based space, where regulated advisory services are “bolted on”, it is common practice for an FCA-regulated adviser (eg an IFA) to contract directly with the member. Requiring a similar direct relationship between the firm providing targeted support and the member might be necessary to make targeted support via a third party viable in trust-based schemes, although we appreciate this would introduce some potentially unwelcome friction into the member journey. Trustees may be reluctant to offer targeted support in the absence of a direct contractual relationship between the member and the third-party FCA-regulated provider. Consideration would need to be given as to how this would work in circumstances where the support is reactive (eg in response to a member asking to cash out all their benefits). This might require members to opt into targeted support (rather than to opt out) and not all those who would benefit are likely to do so.

Alternative suggestions could include a sponsoring employer or the trustees contracting as agents on behalf of members or deeming a contract to exist where the FCA-regulated firm seeks and receives information directly from the member. (This would not be suitable where the provider is using data which the trustees already have and shares with it, negating the need to seek any additional information.)

Alternatively, where the FCA-authorised partner has a mobile app, it might be possible to establish a direct contractual relationship via the terms and conditions of using the app. However, this may not reach the least engaged members, who are arguably the most in need of targeted support.

Overall, while requiring some form of opt-in may not be desirable for the reasons outlined above, it would be the easiest way to make clear who the targeted support is being provided by and to ensure a new legal relationship is created.

Data issues:

There are several critical data-related challenges that must be addressed before trustees can effectively engage in the provision of targeted support:

• Limited access to member data: OPS trustees typically do not have access to the breadth and depth of personal data available to providers of contract-based schemes. Whether it would be appropriate, or even permissible, under trust law for trustees to proactively obtain additional data requires careful consideration (noting our comments above about the extension of trustee duties in this area under the proposed new DPBS framework). OPS trustees must act in members’ interests and at the point targeted support is first given it may be unclear whether collecting such data aligns with that duty.
• AI and the Risk of Bias: AI will likely play a key role in analysing member data and generating targeted support. However, there are inherent risks of bias in AI-driven models. For instance, if data is gathered via voluntary surveys, there is a risk of sampling bias, ie only certain subsets of members may respond, potentially skewing outcomes. Moreover, if existing datasets are used to train models, there is a danger of reinforcing existing issues in decumulation outcomes.
• Lawful Basis for Data Processing: Consideration needs to be given to the lawful basis for processing data, especially where special category data is collected as this is subject to additional conditions. In particular, it may be necessary to explore whether a specific exemption could apply to avoid reliance on consumer consent which would not be practical.

Targeted support communications

• We agree that clear and specific communication requirements should apply to targeted support including that it is based on limited information and, as such, that it is not individualised advice. It would be helpful if the FCA/TPR/DWP jointly publish specific wording to be used in such communications to ensure a consistent message across providers.
• In practice, we understand that targeted support will involve firms pre-defining certain “trigger” situations, such as a member stopping or reducing pension contributions. Communications issued in response to these triggers, while well-intentioned, carry a risk of being poorly received if the underlying reason for the member’s action is not known. For example, a member who stops saving due to serious illness may receive a message encouraging them to continue contributions on the basis that they are likely to live to age 95. In such cases, the communication could appear insensitive or inappropriate, undermining trust and the support being offered.