Further FCA consultation launched on the regulatory framework for pensions dashboard service firms

The Financial Conduct Authority (FCA) launched a further consultation on 27 March on the regulatory framework for pensions dashboard service (“PDS”) firms. 

This latest consultation follows on from an earlier FCA consultation in late 2022. It also comes after the government recently legislated for the activity of operation of a PDS to come under the regulatory ambit of the FCA as a “regulatory activity”.

As a result of that, the FCA is proposing guidance in its Perimeter Guidance Manual to help firms understand the scope of the new regulated activity and when FCA authorisation and permission is required. 

The FCA is also consulting on two “substantive” changes to its earlier regulatory framework proposals covered in the first consultation. It now proposes to:

• Require firms to present the consumer with choices for their initial next steps after viewing their pensions data on a PDS. As part of that, the FCA also proposes that firms provide certain communications that will help ensure consumers can take appropriate care when their selected next step takes them outside the regulated PDS. 
• Revise its data export proposals to create a single, consistent route for consumers to share their dashboard data with an FCA regulated investment adviser. These proposals aim to promote competition and consumer choice in the advice market.

The proposed changes covered in this latest consultation take account of industry feedback to the earlier consultation and engagement by the FCA with consumer and industry representatives. 

Importantly, the FCA acknowledges the possible impact of other ongoing pension projects such as the joint Treasury and FCA review of the Advice Guidance Boundary Review (see my colleague, Kerry Berchem’s earlier blog on this - The Advice Guidance Boundary Review – can the financial services industry help more consumers to make good financial decisions?, Kerry Berchem (burges-salmon.com)) and the DWP’s Small Pots Solution (please see our earlier blog on this too - The Mansion House reforms: win-win? (burges-salmon.com)). The FCA confirms that it will revisit the regulatory framework for PDS firms “when there is greater clarity about what will be expected”.

This second consultation has not received a huge amount of commentary in the pensions press, although concern has been expressed by others about a potentially restrictive approach being taken, particularly so given the existing Consumer Duty framework (Consumer Duty: Findings from the FCA’s review of fair value frameworks, Carly Phillips-Jones (burges-salmon.com)) which already operates to protects financial services customers. So there is a question mark from some about whether further regulation is really required by the industry or whether what is in place already, is sufficient to inform and guide customers. 

If you would like to discuss any aspect of this update, please contact your usual BS pensions team contact or Pensions Partner, Clive Pugh. 

Importantly, the FCA acknowledges the possible impact of other ongoing pension projects such as the joint Treasury and FCA review of the Advice Guidance Boundary Review