Targeting better outcomes

What is this all about?

The Financial Conduct Authority (FCA) has laid out broad proposals for a new form of consumer financial support, which is positioned as a new option between fully tailored advice and guidance for defined contribution (DC) pensions savers. ‘Targeted support’ would identify solutions aimed at groups sharing the same needs and characteristics as the saver ('people like you') and wouldn't be considered as the same level as fully regulated financial advice.

The FCA believes that many financial advisors would provide targeted support without charging an explicit, upfront fee. It states that if they recover their costs in other ways, they must ensure this doesn’t result in some customer groups receiving less than fair value. It doesn’t propose to allow remuneration via commission payments. The FCA is working to extend targeted support to more investments instruments and will draft rules and guidance for consultation by mid-2025.

We believe the FCA’s approach is a step in the right direction, but three concerns must be addressed:

1. Inconsistency across providers. Employees need a clear, fair, and standardised framework across the industry.
2. Financial wellbeing extends beyond pensions. A more holistic approach would lead to better long-term outcomes.
3. Stronger safeguards are needed. Without clear oversight, employees may misinterpret guidance as personal recommendations, leading to potential financial risks.

What does this mean for UK employers?

Employers should stay up to date with the latest guidance on ‘regulated advice’ and speak with their pension provider to ensure they understand the support currently available to savers, as well as any planned developments.

Please reach out to your Lockton consultant if you have any questions or would like to discuss this further.