Ellie Duncan News, Top 3 Financial Conduct Authority, Therese Chambers
The UK’s financial watchdog has begun consulting on whether to exclude certain performance-linked fees, which are common in private markets, from the charge cap for default funds in workplace pensions it regulates.
Under the Financial Conduct Authority’s (FCA’s) proposals, workplace pension providers would have greater flexibility to access a broader range of investments on the basis that this provides improved long-term returns and value for savers.
The FCA is proposing safeguards covering transparency, fair allocation of fees between savers and scrutiny of how private assets, including private credit, are valued.
It confirmed that providers and independent governance committees would need access to the necessary information to assess whether performance-linked fees offer value for money.
Should the proposals go ahead, it would bring FCA rules in line with the regime for trust-based pension schemes, where certain performance-linked fees have been excluded from the charge cap since 2023.
“We want providers to have greater choice over how they invest for the long term where this can deliver better outcomes for savers,” said Therese Chambers, executive director of enforcement and market integrity at the FCA.
However, she cautioned that “greater flexibility is not a licence to charge more”.
“Any higher charges must be justified by additional value, with firms carefully weighing returns, risks and costs when deciding what is in savers’ best interests,” Chambers added.
The consultation is open until 14 January 2027, with final rules expected in summer next year.
