Targeted support and trust-based pension schemes

The FCA has recently published a consultation paper setting out detailed rules for a new regulated proposition: targeted support. It is proposed that firms would be allowed to make specific recommendations to groups of consumers with common characteristics such as life stage.  

Whilst trust-based pension schemes are not the main focus of the proposals, the FCA wants input from trustees. The FCA sees ‘targeted support’ and ‘guided retirement’ as a two-pronged approach to (1) bridging the advice gap among those approaching retirement and (2) offering a safety net for those at retirement and who have not engaged to date. Separately, the Pensions Regulator is also urging trustees to respond to the consultation.

The FCA says: 

We are interested to understand the situations and nature of the ready-made  suggestions that trustees would want to provide if they were to give targeted support. We particularly welcome views on how trustees may want to provide targeted support or a version of it that applies solely to ‘in scheme’ benefits. This includes whether this would be done under the trust-based occupational pension scheme itself, or whether trust-based schemes would partner with a third-party FCA-authorised firm to deliver targeted support, or a version of it, for the scheme’s  members. We are interested in how trustees would want to do this in practice. 

…

We want to understand the support that trustees wish to give their members, and in particular, whether they feel unable to give such support because they are worried about undertaking a regulated activity or financial promotion. We are interested in receiving specific examples from trustees.

Reading between the lines, it seems the FCA is concerned that savers might face an inconsistent experience across different types of pensions – receiving targeted support in respect of some pensions but not others. 

Targeted support in practice 

Briefly, there is a four-stage process to targeted support: 

1. Pre-define situations: Firms identify specific financial situations consumers may face, where targeted support could help achieve better outcomes.
2. Pre-define consumer segments: Firms define groups of consumers with common characteristics relevant to the identified situation.
3. Pre-define ready-made suggestions: For each consumer segment, firms develop a ready-made suggestion tailored to the group’s shared characteristics.
4. Deliver the ready-made suggestion: Firms verify that an individual consumer aligns with a pre-defined segment, and deliver the corresponding suggestion.

Trustee considerations 

At a high level, trustees will likely be thinking about: 

• The prospect of carrying out a regulated activity without authorisation. Currently, there is a risk of the FCA imposing penalties (including criminal sanctions) if trustees get it wrong, which means they (understandably) err on the side of caution regarding member guidance. This can result in members taking retirement decisions without the support they might want or need. Here, the FCA says: “…support that relates solely to ‘in-scheme’ occupational pension scheme investments will generally not involve trustees carrying out regulated activities without being authorised (or exempt)”. 
• How to define consumer segments and ready-made suggestions?
• Who would be responsible for any losses suffered by consumers who act on targeted support? 

The FCA mentions partnering with an FCA authorised firm to offer targeted support.  Here, trustees will likely be thinking about: 

• Lines of responsibility. 
• Data protection.
• Potential liability. 
• Risk of initiative being used by the authorised-firm to aggressively cross-sell. 

There will be quite a bit for trustees of DC schemes to digest here alongside the recently confirmed duty to offer default pension benefit solutions to consumers who are retiring. 

We will publish our detailed analysis of the FCA’s proposals and default pension benefit solutions in due course. 

Looking ahead 

The FCA’s consultation on targeted support closes on 29 August 2025 with final rules to be published by the end of 2025. As part of this process, the FCA may want to revisit and update the joint FCA/TPR guidance on where employers and trustees can provide support on financial matters without needing to be subject to FCA regulation (as issued in March 2021), particularly in the context of their interactions with FCA regulated firms. 

Burges Salmon is well placed to advise on all aspects of DC pensions and decumulation issues. If you would like to explore this topic further, please contact Mamunul Wahid or Susannah Young.