Pensions Bulletin 2025/26

FCA sets out its targeted support rules

The Financial Conduct Authority is consulting on introducing “targeted support” for pensions and investments, with feedback welcomed by 29 August 2025 and a final policy statement expected by the end of 2025.

This latest consultation (which was expected following the previous consultation on this last December – see Pensions Bulletin 2024/49) follows from the FCA’s concerns that decisions about pensions and investments are complex, amplified by changes in pension structures (from defined benefit to defined contribution), pension freedoms, inflation, the cost-of-living crisis, and digital influences.

To support this consultation, the Government has announced that it will consult on proposed amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to create a new specified activity of targeted support and these will be published alongside the Chancellor’s Mansion House speech on 15 July. This will establish targeted support as a new service, different to existing forms of advice.

Why targeted support?

Many consumers are under-saving or lack clear plans for retirement. Regulated advice is only accessed by a small proportion of consumers (9% in the 12 months to May 2024, according to the FCA), with others relying on informal sources such as friends and family or social media. As a result, there is a significant advice gap where many need support but do not receive it, potentially leading to poor financial outcomes.

It is this advice gap that the FCA is seeking to plug with targeted support. This is a new service allowing firms to provide non-personalised suggestions to groups of consumers with similar characteristics. Targeted support also has the potential to act as a stepping stone to simplified or more comprehensive investment advice where consumers want or need more personalised advice.

Limitations of the service

Targeted support is limited to investments and pensions only and other types of products, such as mortgages and pure protection insurance, are beyond the scope of these proposals.

Targeted support cannot be used:

• To provide recommendations on giving up safeguarded pension benefits. Advising on the conversion or transfer of these types of benefit will continue to be regulated under the existing Regulated Activities Order.
• For recommending particular annuities – but can be used to suggest features of an annuity, and firms will also be able to continue to give information and general guidance on annuities.
• For recommending particular products for consolidation of, for example DC pots.

The FCA intends that targeted support will help consumers achieve better outcomes than if they had not received it. The FCA acknowledges that targeted support suggestions may not be as beneficial as more personalised recommendations provided by full individualised advice, but this is a trade-off the FCA is willing to make, especially as many consumers are currently experiencing harms in the absence of support.

Some of the key features of targeted support are that it is based on limited information and not tailored to individuals and that it must be clearly communicated as not individualised advice.

Likely use cases

The FCA expects that most firms will offer the service at no direct cost to the consumer. And whilst no commissions will be allowed in connection with the provision of targeted support, cross-subsidisation will be permitted to enable “firms to offer the service without charge in a commercially viable way”. Further, the FCA proposes that targeted support providers will be required to disclose to customers how the firm will be remunerated for the provision of the service.

The FCA gives some examples of where targeted support could be used, including:

• Suggesting an alternative pension contribution rate for under-savers.
• Advising tax-efficient pension access options for those nearing retirement.
• Recommending types of investment products to consumers ready to invest.
• Suggesting alternative investment products based on group characteristics.

Relationship with the Consumer Duty

The FCA is also clear that its approach to setting a targeted support framework is to use existing requirements where possible, underpinned by the Consumer Duty and also proposes new outcomes-focused conduct standards. These will set a clear, high-level framework for firms, giving them flexibility to tailor their targeted support journeys, so they work best for their customers. However, firms will not be required to offer targeted support to comply with the Consumer Duty.

Firms must treat all recipients of targeted support as retail customers and the Consumer Duty will apply to the design and delivery of all targeted support.

Use by trustees and interaction with guided retirement

The FCA also addresses the interaction with the recent Pension Schemes Bill proposals on DC decumulation solutions (also known as guided retirement) and intends to work closely with the Pensions Regulator to avoid conflict between the targeted support and guided retirement proposals with the latter aimed at consumers who do not or cannot engage with decumulation decisions. However, the FCA goes on to say that it is 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 and they welcome views on how this would be done in practice, including whether trustees would provide targeted support directly, or whether trustees would partner with a third-party FCA-authorised firm to do so.

Simplified advice

The FCA also sets outs its plans for “simplified advice”, albeit that a later consultation will set out the detail. The FCA distinguishes between targeted support and simplified advice, with the latter being a personal recommendation, focused on a consumer’s specific need and assessed as suitable for an individual taking account of essential information relevant to that need. It takes a narrow approach, for example, by determining the suitability of investing a lump sum without considering a customer’s wider circumstances and other financial needs.

The advice / guidance boundary

A long-standing concern for pension scheme trustees has been problems with the advice / guidance boundary and the FCA plans to improve existing guidance on the boundary between the provision of information and guidance on the one hand, and different forms of advice on the other. However, the FCA believes it will be more impactful to do this once the boundaries of targeted support are settled.

IFS concludes its pensions review

The Institute for Fiscal Studies has brought its two-year review of pensions policy to a conclusion with the publication of its final recommendations. The review was kicked off in April 2023 (see Pensions Bulletin 2023/17) given a number of concerns that the IFS says are facing future generations of pensioners.

The IFS says that the current UK pension system, despite its strengths, faces significant challenges. These include the impact of an ageing population on the public finances, insufficient pensions saving by those of working age, particularly the self-employed, and challenges within the pensions system on when and how pensions wealth is accessed. Taken together, these factors are a recipe for too many to have poor financial security through retirement.

The IFS goes on to make a number of proposals, which can be summarised as follows:

• State pension – there should be a ‘four-point guarantee’ for the state pension, to increase confidence in it as a stable and secure basis of the pension system. This guarantee is to comprise a clear earnings-linked target for the new state pension (which once reached would mean that the triple lock had done its job), the state pension to always increase in line with at least inflation, the state pension to never be means-tested; and state pension age to remain universal and to continue to increase as longevity at older ages rises, but not by as much as that increase in longevity.
• Private pension saving – minimum employer contributions should be extended to almost all employees and apply from the first pound of their earnings. Defaults for total pension contributions should be increased when individuals are on (and above) average earnings. It should also be made easier for self-employed people to participate in a private pension.
• Means-tested support – Universal Credit should be enhanced for those in the run-up to an increasing state pension age to help to alleviate the increase in poverty that would otherwise occur. Means-tested support for pensioners should be streamlined to boost take-up, and housing benefit should be made more generous for the growing number of pensioners residing in the private rental sector.
• Managing retirement income – pensions need to be easier to manage, particularly through retirement. Fragmentation across many small pots needs to be reduced dramatically, with the proposed £1,000 level for automatic consolidation of pensions rising once it has been successfully implemented for the very smallest pots. Individuals should be guided towards ways of drawing on their pensions that reduce the risk of them running out of private resources, but high-quality information should also be available so that individuals can make decisions without having to take financial advice.

The IFS says that its proposals would build on the many successes of the current pension system, and address some of the key weaknesses, leading to a significantly improved system that would help millions of people enjoy a better retirement in the future. But it worries that even if there is general agreement to its reforms, any complacency and inaction in implementing them would have huge costs. Although it believes that reform is urgently needed, some aspects can be gradually implemented, whilst others, particularly in relation to managing retirement income can be announced more quickly.

Government consults on climate-related transition plans

On 25 June 2025 the Secretary of State for Energy Security and Net Zero, Ed Miliband, announced three linked climate-related consultations at the Climate Innovation Forum during the London Climate Action Week, stating that “it is time to mobilise the City of London, secure its place, which it already has, as the sustainable finance capital of the world and drive private investment into clean energy“.

The three consultations were launched on the same day and are covered separately in this and the following two articles. In the consultations the Government emphasised that an important objective is “to deliver decision-useful and credible information about sustainability and climate-related financial risks and opportunities to investors”.

The first of these consultations was on options to take forward climate-related transition plan requirements, launched by the Department for Energy Security and Net Zero.

The transition plan consultation follows the Labour Party’s 2024 manifesto commitment to require “UK-regulated financial institutions – including banks, asset managers, pension funds and insurers – and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement”.

The consultation seeks views on how the Government should take forward this commitment, including:

• What roles should the existing Transition Plan Taskforce’s voluntary disclosure framework and the proposed UK Sustainability Reporting Standards (see article below) play in the contents of the new transition plan requirements.
• In line with the Government’s intention to reduce regulatory burdens (see Pensions Bulletin 2025/11), what would provide a proportionate regime – with possible disclosure requirements ranging from a “comply-or-explain” option, a mandatory transition plan disclosure requirement, to a mandatory implementation regime.
• Whether climate adaptation and resilience alignment, and also nature alignment, should be incorporated into the transition planning policy, and in particular exploring the use of 2°C and 4°C global warming scenarios for risk planning.
• As well as the UK-regulated financial institutions and FTSE100 companies, whether the scope should be extended to other economically significant entities, without compromising the attractiveness of the UK as a listing destination by creating additional or unnecessary burdens for firms.

Insofar as pension schemes are concerned, the consultation paper says that the Department for Work and Pensions will review the 2021 Climate Change Governance and Reporting regulations, building on evidence provided by the Pensions Regulator, to consider potential next steps on climate-change reports. In addition to the review of the regulations and seeking input from pension schemes through this consultation, the DWP has asked the Regulator to assess the practicalities of transition plans for pension schemes. The Regulator is convening an industry working group and will present findings to DWP later this year.

Consultation closes on 17 September 2025 and the Government intends to deliver an updated plan for all sectors of the economy by October 2025.

UK sustainability disclosure standards proposed

In the second linked development, the Department for Business and Trade launched a consultation on draft UK Sustainability Reporting Standards (UK SRS), based on two International Sustainability Standards Board (ISSB) standards – “IFRS S1” General Requirements for Disclosure of Sustainability-related Financial Information and “IFRS S2” Climate-related Disclosures.

This long-awaited consultation, promised in 2023, follows a recommendation by an advisory committee, made public in December 2024 (see Pensions Bulletin 2025/01), that minor amendments be made to both standards for the purpose of their UK application. The Government has aimed to limit divergence from the ISSB standards as far as possible, reflecting the efforts of many jurisdictions around the world to converge around a single set of standards. As a result, it proposes to make six minor amendments to the standards centred on transition reliefs at the start of application of the standards, the “effective date” to starting compliance with the standards, and references to Sustainability Accounting Standards Board materials and the Global Industry Classification Standard.

The consultation seeks views on these amendments and on the costs and benefits of using the UK SRS. Consultation closes on 17 September 2025 and, if the Government decides to endorse the UK SRS, the final “UK SRS S1” and “UK SRS S2” will be made available for use on a voluntary basis, on an anticipated autumn 2025 timeline.

The decision on whether to make these standards mandatory will be assessed separately by the FCA for UK listed companies and the Government for other entities, although no timeline has been given for these future steps.

Assurance of sustainability reporting proposed

In the third linked development, the Department for Business and Trade launched a consultation on the Government's proposal for greater regulatory oversight of third-party assurance services for sustainability-related financial disclosures. The intention is that the Audit, Reporting and Governance Authority (ARGA), which is to replace the Financial Reporting Council, will be given responsibility for creating a voluntary registration regime for providers offering such assurance services.

The consultation follows the publication by the FRC, in February 2025, of findings from its market study into the assurance of sustainability reporting, which highlighted demand for stronger regulatory oversight of assurance providers.

The purpose of this register is to provide transparency for companies looking to obtain sufficiently qualified sustainability assurance services in the UK. The EU’s Corporate Sustainability Reporting Directive also requires disclosures to be accompanied by an assurance opinion from an authorised provider.

The Government’s proposals include:

• The creation of the legal concept of a “sustainability assurance provider”. The qualification will be profession agnostic, as a broad range of skills will likely be needed to perform effective assurance of sustainability-related financial disclosures.
• Registered providers needing to meet the Government’s standards for provision of assurance across a range of sustainability-related disclosure frameworks including UK SRS, the Task Force on Climate-related Financial Disclosures (TCFD), European Sustainability Reporting Standards (ESRS) and International Financial Reporting Standards (IFRS).
• ARGA being responsible for registering these providers, setting the eligibility criteria for registration, monitoring their performance and taking proportionate enforcement action where necessary. ARGA will also be responsible for issuing guidance and support for providers.

In the long term, the Government will also consider whether to go beyond the voluntary approach, and mandate assurance of company disclosures against UK SRS, subject to Government endorsement of the standards (see above article).

Consultation closes on 17 September 2025. If agreed, implementation will require changes to legislation and therefore timing of the regime will be subject to Parliamentary approvals and passage.

New mortality projection model finalised

Following a consultation in February (see Pensions Bulletin 2025/08), the latest mortality projection model, “CMI_2024”, has been issued by the Continuous Mortality Investigation (CMI) of the Institute and Faculty of Actuaries. The final model takes forward the February proposals, apart from some new technical details in how the mortality trends for different age groups are fitted into the model.

As before the aim of the updates to the model are to better reflect recent mortality trends seen in England & Wales. In particular:

• Weights used for the previous four versions of the model have been dropped as a mechanism to navigate through the pandemic. Instead, the model reflects the high mortality rates during the pandemic through an explicit “overlay” to model excess deaths, starting at their high in 2020 and reducing down to a “new normal” at a speed determined by the new half-life parameter “H”. As this governs how quickly excess deaths due to the pandemic run off and mortality reaches a new normal, trustees will need to form a view on H with actuarial support.
• The model takes into account the differing trends for different age groups in recent years, with older ages having experienced stronger improvements than younger ages.

The publication of CMI_2024 was delayed allowing more time to consider the major changes to the model. The CMI intends to revert to the usual March publication schedule for the next update in 2026.

The PLSA is now Pensions UK

At a launch event hosted by LCP, the Pensions and Lifetime Savings Association (PLSA) announced it is now to be known as Pensions UK.

At the same time, Pensions UK launched its strategy for the next five years with five strategic priorities the renamed organisation will be working towards. These priorities include making pensions better and influencing pension policy.

These priorities have been decided in light of the significant changes taking place in the pensions industry over the next decade and Pensions UK’s expectations that the master trust and DC contract-based markets, along with LGPS assets, will grow considerably by 2035, whilst the overall size of the DB sector will continue to decrease. At the same time, Pensions UK highlights that UK savers are facing growing uncertainty with worries that their money won’t last, more retirees expected to be living in private rented accommodation, with rising life expectancy and one in five workers projected to fall short of the minimum Retirement Living Standard (See Pensions Bulletin 2025/22).

Pensions UK states that it wants to see:

• Above all, a pension system that provides an adequate retirement income to savers and is affordable and fair.
• Adequate retirement incomes, delivered by a market that is well run and well regulated.
• Pension investments that deliver strong risk-adjusted returns and play a positive role in society and the economy. Schemes exercising fiduciary duties responsibly and in the long-term interests of savers.
• Savers supported in both work and retirement by a system that is simple and digital-first, and by advice and guidance that is effective and accessible.

Pensions UK also says that where it sees “red flags” – like the risks attached to Government mandating investments – it will do all it can to represent the views of members and interests of savers.

Timescale for the draft Audit Reform Bill slips once more

According to newspaper reports the Government’s draft Audit Reform and Corporate Governance Bill, promised in the July 2024 King’s Speech (see Pensions Bulletin 2024/27), will now not be published until the autumn. The Government had intended to publish much earlier in 2025, but it appears that the Bill is proving difficult to draft and there are other Bills that the Government wishes to focus on first.

Pensions Regulator challenges investment industry

In the latest speech by Pensions Regulator Chief Executive, Nausicaa Delfas, asset managers and the investment industry have been told to “bring forward new funds and investment products which deliver long-term value” in order to play their part in a DC “pensions revolution”.

The speech, delivered at the Annual Conference of the Investment Association, was set in the context of the reforms being introduced by the Pension Schemes Bill and the changing DC landscape that the Bill intends to accelerate. The questions at the end of her short speech suggested that in her view, the investment industry is not supportive enough of long-term assets, has multi-asset solutions that are not optimised for decumulation, and default funds “aren’t working hard enough”. 

The Pension Schemes Bill itself is now due to have its Second Reading in the House of Commons on 7 July 2025. We will report on any material developments at Second Reading in next week’s Pensions Bulletin.