This month we provide an update on the Pensions Regulator imposing penalties for reporting failures and the FCA’s proposals for targeted pensions support.
The Pensions Regulator imposes maximum penalty for reporting failures
Kirsty Cotton, Janine Bennett | July 24, 2025
The Pensions Regulator (TPR) has imposed penalties of £50,000 on both the employer and trustees for failing to correctly report significant events and breaches of law relating to more than 80,000 statutory automatic enrolment communications.
Although some aspects of this case are specific to master trusts, in its NOW: Pensions – Regulatory intervention report, TPR highlights points which are relevant to the wider industry:
'Communicate effectively with members: Failure to send timely and accurate information to members puts them at risk. … communication failures in this case had caused both financial and non-financial harm to members and potential members. The failures took away members' opportunities to make decisions about their pensions.'
'Report problems early: Failure to tackle a problem in a timely way could lead to more risk to savers. [Schemes] must report significant events and breaches of law early so that [TPR] can take appropriate action. Problems should be rectified quickly and prevented from escalating.'
'Check your systems and processes: …Administrative and governance failures could indicate other issues and shortfalls. Schemes should monitor their systems and processes...'
'Get data ready: In this case, missing and incorrect email addresses led to the communication failures. Schemes should ensure they have the correct information for their members. Schemes should now be well on their way to preparing for their connect-by date for connecting to pensions dashboards.'
The proposals would allow authorised firms to provide 'targeted support' for savers as a new regulated activity and builds on the framework that the FCA consulted on in December 2024. It is not personalised financial advice; rather it is intended to allow FCA-registered organisations (Firms) to make specific recommendations designed for pre-defined groups or cohorts of people with common characteristics with the aim of helping them achieve better savings and retirement outcomes.
The FCA recognises that targeted support, together with the mandatory guided retirement requirements included within the Pension Schemes Bill, will influence how trustees choose to support their members. FCA wants to hear what type of 'targeted advice' trustees wish to make available to their members and will work with TPR to review whether further clarity is required in the joint Guide for employers and trustees on providing support with financial matters without needing to be subject to FCA regulation.
The consultation clarifies that targeted support aims to support consumers in making informed choices, whilst default pension benefit solutions (as part of guided retirement under the Pension Schemes Bill) would seek to create a default decumulation option for consumers that do not/cannot engage with financial advice or their pension scheme.
How will targeted support make a practical difference?
The consultation sets out some examples of how targeted support can go "beyond what firms can currently do when providing guidance". For example, currently a firm is permitted to warn an individual that they may be under-saving for retirement. Under targeted support they could go on to suggest an alternative contribution rate.
Similarly, on decumulation options, firms could move from merely providing factual information about options to suggesting how to access pension "in a way which is appropriate for their consumer group, for example taking an income in a more tax efficient way using an uncrystallised funds pension lump sum rather than drawdown". Another example given is to suggest an alternative drawdown rate rather than merely alert savers that they might be taking their retirement income at an unsustainable rate.
Currently, the FCA considers such proposals would fall within the existing definition of a 'personal recommendation', which has 'Know Your Customer' connotations. Creating a new specified activity of targeted support would enable firms to provide more direction to savers than is possible under the existing non-personal 'guidance'.
What constraints will apply?
Firms will need to highlight that the suggestion is based on limited information and identify the relevant characteristics – both for inclusion within (or exclusion from) the targeted group eg individuals might be excluded if they had a significant health issue that was likely to impact their individual life expectancy.
The consultation sets out various conditions that firms' targeted support needs to meet. For example, it should lead to better outcomes for, or prevent "a risk of foreseeable harm" to, their customers. It also highlights the need for firms to identify an appropriate level of detail in relation to identifying cohorts/consumer segments – too much detail strays towards individual advice and too little risks not achieving the objective of better-informed member decision-making.
Certain 'pension' decisions are considered in the consultation paper:
Transfers of safeguarded benefits: The FCA has concluded that it is inappropriate for targeted support to provide recommendations on giving up safeguarded pension benefits (eg defined benefit to defined contribution transfers). Firms will continue to need specific authorisation to advise on such transfers.
Consolidation: Similarly, the FCA considers that "it would be difficult to use targeted support to suggest consolidation into or out of a particular product". However, it goes on to state that it expects "to consult on measures to clarify expectations in relation to consolidation later this year".
Annuity purchase: Additional protections need to be built in when using targeted support to recommend annuity purchase because it is irreversible. In particular, individuals must be directed to MoneyHelper's annuity comparison tool alongside the recommendation for a particular type of annuity – it would not be permitted to provide an annuity quote or direct an individual to an annuity bureau until the consumer had had time to approach MoneyHelper, the consultation paper suggests at least two weeks.
Firms will not be required to provide targeted support as part of their business model. FCA research found that most (of those who intend to do so) will not make an additional charge to a saver to access the service. Explicit or cross-charging will be permitted, subject to appropriate disclosure etc…
What forms of guidance/advice will be available?
The document identifies four types of guidance/advice that will be available:
Guidance/information which is not a regulated activity and so can be provided by trustees/employers who are not FCA-regulated.
Targeted support as discussed above.
Simplified advice. This is a personal recommendation but focused on a consumer's specific need and so only takes into account essential information relevant to that need. It requires FCA regulation.
Holistic advice. This is full blown individual advice. It requires FCA regulation.
Quite a lot of the document considers this spectrum and FCA is planning to "consolidate, simplify and clarify existing guidance on the advice guidance boundary" during 2026.
Consultation closes on 29 August 2025 and the FCA aims to finalise its rules by the end of 2025.
