On 15 October 2025, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) published Policy Statement 21/25: Remuneration Reform (PS21/25).

Background

On 26 November 2024, the PRA and the FCA published a joint Consultation Paper (PRA CP16/24 / FCA CP24/23) on proposed reforms to the dual-regulated firms’ remuneration regime. The consultation closed on 13 March 2025.

The reforms proposed in the consultation sought to maintain the remuneration regime’s overall structure and objectives while simplifying the regime and tailoring it more to the UK market, by:

  • Reducing the number of individuals that are subject to the remuneration rules (known as Material Risk Takers (MRTs)).
  • Simplifying the approach for identifying MRTs, placing more emphasis on firms to own and safeguard the process.
  • Bringing rules on deferral of variable remuneration (such as bonuses) more in line with international practice.
  • Ensuring that variable remuneration better reflects risk-taking outcomes and individual responsibilities.
  • Aligning the regulators’ rules on buy-outs in relation to small firms.

The consultation also included FCA-specific changes. It proposed to change the structure of SYSC 19D so that it largely cross-refers to the PRA’s remuneration rules. Thereby:

  • Removing the need for the FCA to maintain its own set of parallel remuneration rules.
  • Ensuring the PRA’s proposed rule changes would automatically apply to firms in scope of the FCA’s dual-regulated firms Remuneration Code.
  • Ensuring that where the FCA has decided to keep specific rules relating to remuneration, or where the FCA provides specific guidance explaining how firms in scope should apply the remuneration rules, these will remain in SYSC 19D.

The FCA also proposed exempting ‘small’ dual regulated firms from requirements related to buy-outs, in alignment with the PRA’s existing approach.

Final policy

In PS21/25 the PRA / FCA report that respondents to the consultation were strongly in favour of the proposals and proposed a small number of further changes or clarifications. In response the regulators have made certain changes to their final policy, where doing so continues to advance their objectives and is proportionate.

Deferral

In particular, the regulators have made the following changes as regards deferral:

  • Deferral periods for relevant senior management functions have been reduced to 4 years. This means all MRTs will now be subject to the same 4-year minimum deferral period.
  • Firms are given flexibility over the proportion of bonuses that can be paid in cash up front by deleting Remuneration 15.16.
  • Deferral requirements have been reduced for many individuals by allowing firms to calculate the share of bonuses that must be deferred more proportionately through amending Remuneration 15.18. Specifically, the higher deferral proportion (60%) for high earners will now apply on a marginal basis, with the 40% deferral rate applying to the first £660,000 of all bonus awards.

Other changes

The PRA has also:

  • Reintroduced an exemption from certain rules on remuneration structures for individuals who have been MRTs for less than 3 months.
  • Removed the requirement for pre-notification of retention awards from Supervisory Statement (SS) 2/17 – Remuneration.
  • Provided clarity on interim modifications to remuneration reporting prior to a fuller consultation in future.

The PRA has also made minor clarifications to the requirements relating to its other proposals on MRT identification and individual accountability which are set out in detail in Chapters 3-5 of PS21/25.

FCA proposals

The regulators also report that respondents to the FCA’s specific proposals were supportive of the proposed changes. As such, the FCA is proceeding with these changes as consulted on. This will mean updating the format of ‘SYSC 19D Dual-regulated firms Remuneration Code’ so it largely cross refers to the ‘Remuneration Part’ of the PRA Rulebook.

Timing

The regulators proposed that the changes in the consultation, would come into force on the next calendar day after publication of the final policy and would apply to firms’ performance years starting after that date. However, in light of the responses to the consultation the PRA has decided that the following may be applied by firms, on an optional basis, to a firm’s performance year which is ongoing on 15 October 2025, and/or to remuneration that has been awarded in previous performance years but not yet vested:

  • Deferral length (Remuneration 15.17, Paragraphs 4A.2, 5.44A SS2/17).
  • Amount deferred (Rules 15.17-15.18, Paragraph 5.44, SS2/17).
  • Payment in instruments (Rule 15.16).
  • Pro-rata vesting of pay for SMFs (Rule 15.17).
  • Retention periods (paragraphs 1.9A and 1.9B SS2/17).
  • Retention awards (paragraph 5.39 SS2/17).

The regulators will not ask firms to re-submit their Remuneration Policy Statements for the current year if they have already done so before 15 October 2025. This implementation flexibility can be used at firms’ discretion.

All other changes set out in PS21/25 will come into force on 16 October 2025 and apply to firms’ performance years starting after that date.