On 1 December 2022, the FCA published Policy Statement 22/15: Improving outcomes in non-workplace pensions (PS22/15).
In PS22/15 the FCA sets out its responses to the feedback it received on its November 2021 consultation requiring firms to offer a default option to non-advised consumers buying a non-workplace pension (NWP). It also sets out the FCA’s final rules and guidance. PS22/15 will primarily be of interest to life insurers, platform providers and self-invested personal pension (SIPP) operators.
Specifically, in the earlier FCA consultation the regulator proposed to require firms to:
- Offer non-advised consumers buying an NWP a ready-made, standardised investment solution (a ‘default option’), and make this available alongside other investments.
- Send a notification (‘cash warning’) to consumers with significant and sustained levels of cash in their NWP to warn them that their pension savings are at risk of being eroded by inflation.
In summary, following consultation feedback, the FCA is finalising the rules and guidance on default options and cash warnings largely as consulted on, with the following changes and clarifications:
- Providing clarity on the scope of the exemption for firms with legacy‑only business.
- Clarifying what the FCA considers to be a ‘bespoke SIPP’.
- Amending requirements on the naming of the default option to allow firms flexibility in its naming.
- Adding a definition of ‘distributes’ for investments.
- Adding guidance to clarify that where a firm outsources the manufacturing of a default option, the firm remains responsible for complying with the requirements in the new default fund conduct of business rules.
- Other miscellaneous clarifications and amendments aimed at improving clarity.
The final rules and guidance are set out in the Appendix to PS22/15. Firms impacted by the changes will need to ensure they comply by 1 December 2023.