Key Takeaways
- • The UK Financial Conduct Authority has launched a consultation on excluding certain performance-linked fees, common in private markets, from the charge cap applied to default funds in workplace pensions it regulates.
- • The proposals would give workplace pension providers greater flexibility to access a broader range of investments, which the FCA argues could improve long-term returns and value for savers.
- • The FCA is pairing the flexibility with safeguards covering fee transparency, fair allocation of fees between savers and providers, and scrutiny of how private assets, including private credit, are valued.
- • If adopted, the rules would align FCA regulation with the existing regime for trust-based pension schemes, where certain performance-linked fees have been excluded from the charge cap since 2023.
- • The consultation closes on 14 January 2027, with final rules expected in summer 2027.
Summary
The UK's financial watchdog, the Financial Conduct Authority (FCA), 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, according to Alternative Credit Investor. Under the proposals, workplace pension providers would gain greater flexibility to access a broader range of investments, on the basis that this provides improved long-term returns and better value for savers.
The FCA is proposing safeguards alongside the flexibility. These cover transparency, fair allocation of fees between savers and scrutiny of how private assets, including private credit, are valued. The regulator confirmed that providers and independent governance committees would need access to the information necessary to assess whether performance-linked fees offer value for money.
If the proposals proceed, FCA rules would be brought into line with the regime for trust-based pension schemes, where certain performance-linked fees have been excluded from the charge cap since 2023. The move would therefore harmonise treatment across the two pension structures.
Therese Chambers, executive director of enforcement and market integrity at the FCA, said: "We want providers to have greater choice over how they invest for the long term where this can deliver better outcomes for savers." She cautioned, however, that "greater flexibility is not a licence to charge more," adding that "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."
The consultation is open until 14 January 2027, with final rules expected in summer 2027.
The FCA is proposing safeguards alongside the flexibility. These cover transparency, fair allocation of fees between savers and scrutiny of how private assets, including private credit, are valued. The regulator confirmed that providers and independent governance committees would need access to the information necessary to assess whether performance-linked fees offer value for money.
If the proposals proceed, FCA rules would be brought into line with the regime for trust-based pension schemes, where certain performance-linked fees have been excluded from the charge cap since 2023. The move would therefore harmonise treatment across the two pension structures.
Therese Chambers, executive director of enforcement and market integrity at the FCA, said: "We want providers to have greater choice over how they invest for the long term where this can deliver better outcomes for savers." She cautioned, however, that "greater flexibility is not a licence to charge more," adding that "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."
The consultation is open until 14 January 2027, with final rules expected in summer 2027.
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