Clear as clay - FCA clarifies costs and charges data disclosure for workplace pension providers

One of the more innocuous curiosities at this year's French Open, which comes to a head this week, was seeing Roger Federer - who at nearly 40 years old has seen just about everything on a tennis court - flummoxed by Covid-related towel-fetching protocols and getting into a comically heated exchange with the umpire (and a time violation for good measure).

Just as experienced heads like Federer can struggle with new rules and procedures, so pension providers have been perplexed by new FCA rules for pension providers around the disclose of costs and charges data.

The issue stems from providers being unclear as to the level of disclosure required, with some preparing disclosures at overarching registered scheme-level (rather than employer-level). On 3 June, the FCA addressed this uncertainty and acknowledged that its consultation paper (CP19/10) and policy statement (PS20/2) failed to make clear that employer-level disclosure was expected.

As a result, the FCA has made a concession and confirmed that it will not take regulatory action against firms that, in this reporting year:

• disclose each set of costs and charges levied (and the number of employer arrangements which have these costs and charges); or
• show the distribution of costs and charges by employer arrangement in another way. 

The FCA has intervened at this juncture as the new requirements - which came into effect from April 2020 - mean that governance bodies, including independent governance committees (IGCs), are required to file their first reports on 31 July 2021.  

The FCA statement recognises that there are two schools of thought on costs and charges disclosure, with:

• some stakeholders believing that disclosure should be done at employer level (in line with the FCA's competition objective, as well as the regulator's aim to align disclosures for contract-based pensions with trust-based pensions); and
• other stakeholders believing that data should be published at the level of the overarching HMRC-registered scheme (with data reflecting the range of charges paid by members in different employer arrangements).  

The FCA's view, however, is that aggregating costs and charges at the overarching scheme level would not promote meaningful comparisons. Conversely, it feels that employer-level comparisons could play a "useful role" in improving value for money. 

The FCA is now considering whether to consult on changes to its Handbook to ensure clarity across the market. Separately, in the summer it is expected to publish a policy statement in relation to its consultation (CP20/9) on how it expects IGCs to assess the value for money of workplace pension schemes and investment pathway solutions.