Key areas of focus
The FCA’s supervisory priorities, updated from its May 2023 letter, highlight areas where some firms are lagging:
- Redress and Complaint Resolution: Although complaints to the Financial Ombudsman Service (FOS) have decreased, around 800 remain unresolved—some over 24 months old. The FCA expects firms to act quickly on FOS-led decisions to resolve these cases and comply with the Consumer Duty, focusing on fair outcomes.
- Pension scheme money and assets: With assets held by SIPP operators now at £184 billion and an additional £204 billion in platform-based SIPPs, the FCA has noted inadequacies in some firms' management of client assets and record-keeping. Concerns include poorly controlled trustee bank accounts and inaccurate books, which the FCA warns can lead to consumer misinformation, valuation errors, and, in extreme cases, fraud. Firms are reminded of their obligations under Principle 10 to ensure robust asset protection.
- Consumer Duty Implementation: While many firms have progressed in implementing the Consumer Duty, gaps remain. Some SIPP operators, in their role as distributors, have yet to define their target markets adequately — particularly for consumers with modest pensions who may not need a full SIPP. The FCA also noted that some firms place an over-reliance on third parties for client communications, risking misunderstandings.
- Product Distribution and Fair Value: To ensure fair value, the FCA expects firms to incorporate cost analyses in product pricing beyond basic market comparisons. SIPP operators should consider both their costs and distribution expenses to verify that fees align with consumer value.
FCA’s next steps and expectations
The FCA has made clear what it expects from SIPP operators:
- Redress Compliance: Firms should expedite the resolution of overdue complaints, using FOS-led decisions to guide quick settlements.
- Improved Asset Controls: Firms should review trustee bank account management, ensuring accurate and up-to-date record-keeping which is overseen by Senior Managers.
- Enhanced Consumer Duty Adherence: SIPP operators must define and evaluate their target market more carefully, reviewing distribution practices to ensure fair value and minimise consumer costs.
- Robust Value Assessment: Operators should include comprehensive cost analyses in their value assessments to ensure pricing reflects genuine value for consumers.
In the coming year, the FCA will increase their direct engagement with SIPP operators, conducting in-person site visits to assess compliance with record-keeping and control standards. The FCA also plans to hold Senior Managers accountable for meeting its expectations, flagging that firms may face regulatory action if they fail to demonstrate compliance.
