On 12 December 2023, the FCA published a ‘Dear CEO’ letter it has sent to investment platforms and self-invested pension plan (SIPP) operators, setting out its concerns on the way they deal with any interest earned on customers’ cash balances.

The letter follows a recent survey of 42 firms carried out by the FCA, which showed that the majority retain some of the interest earned on these cash balances, and this may not reasonably reflect the cost to firms of managing the cash. It found that many also charge a fee to customers for the cash they hold, known as ‘double dipping’.

The FCA warns that it is concerned these practices may not be providing fair value to customers and may not be understood by consumers or properly disclosed. The practice of ‘double dipping’ has raised concerns with the regulator and firms have been told to cease this, as well as ensuring their approach to retention of interest represents fair value for their customers. The FCA also notes that it expects firms to ensure their retention of interest on cash balances provides fair value and is understood by consumers in line with the Consumer Duty, in particular the Duty outcomes of price and value and consumer understanding. Amongst other actions, the FCA expects firms to review and update their terms and conditions as necessary to reflect these Duty outcomes, as well as more generally ensuring their communications meet the rules under the consumer understanding outcome.

Firms will need to make any changes by 29 February 2024.