Which? responds to FCA Targeted Support pensions consultation opposing the proposals

Which? submitted its response to the Financial Conduct Authority's consultation on Targeted Support in pensions on 13 February 2025, saying it cannot support the proposals as currently outlined¹. The consultation forms part of the FCA's Advice Guidance Boundary Review, which examines whether a new framework could improve consumer outcomes¹.

Which? said it could not fully assess the proposals because many crucial parts have yet to be narrowed down, and no decision has been made, working with HM Treasury, on what changes to the legislative framework would be needed to introduce the regime¹. It set out three concerns: that consumer protection is not proportionate or specific to the risk of harm in pensions; that the proposals undermine the existing advice boundary by allowing suggestions for specific products that would currently require regulated financial advice; and that there is little detail on how the FCA would approach enforcement¹.

The response says firms would only be required to base suggestions on "limited information held about the consumer (and possibly extra information from the consumer)", and to have "reasonable grounds for believing that the delivery of targeted support suggestions would deliver a better outcome for their customers than if targeted support was not provided"¹. Which? described the "better outcome" test as too subjective¹.

Which? made three recommendations: that Targeted Support should only be introduced to prevent foreseeable harm for customers using existing products and services, and so should not allow firms to suggest new products or services; that the FCA lead a significant programme of testing to determine whether firms can appropriately design and implement Targeted Support in pensions; and that this testing inform a bespoke consumer protection regime proportionate to the risk of harm with pension savings¹.

The response cites past pension mis-selling. The FCA's four periodic reviews between 2015 and 2019 found that only between 47% and 55% of defined-benefit transfer recommendations were suitable, with advice provided on £82.8bn of transfers and 162,047 members recommended to transfer¹. The FCA found around 8,000 people transferred out of the British Steel Pension Scheme, and almost half (46%) did so after receiving unsuitable advice; more than 6,500 former members have since been supported by the Financial Ombudsman Service, the Financial Services Compensation Scheme or through the FCA's redress scheme, totalling £106m in redress, and the FCA has so far fined 21 firms, totalling £8.87m¹.

The FCA's 2016 thematic review of non-advised annuity sales found that 39% to 48% of customers who bought a standard annuity from their current pension provider may have had qualifying health or lifestyle conditions that would have made them eligible for an enhanced annuity¹. The FCA subsequently fined Standard Life £30m and Prudential £24m for failures related to non-advised sales of annuities¹.

Which? also said it welcomed FCA attempts to clarify how firms can support consumers without providing regulated financial advice, including clarifications published in August 2023 that data protection rules do not preclude firms from informing customers of better savings rates even where those customers have objected to direct marketing, and that firms can provide neutral, factual regulatory communications to retail customers and pension scheme members¹. It said the FCA should investigate what firms have done to put this guidance into practice¹.

Why it matters for households

Targeted Support is a proposed category of help sitting between general guidance and regulated financial advice, under which firms could make suggestions to customers about their pensions¹. The FCA's proposals would allow firms to make suggestions for specific products that under existing rules would require regulated financial advice¹. Which? argues this would mark a major reduction in consumer protection, and that the "limited information" basis for suggestions does not sufficiently guard against suggestions unsuited to an individual's circumstances¹.

The consultation outcome affects how much protection people have when making pension decisions, which Which? describes as some of the most complex decisions for consumers, covering wider pension assets, other financial assets and debts, income and tax implications, a partner's circumstances and outgoings, and health and life expectancy¹. Under regulated advice, advisers must gather relevant information and are liable for suitability, with avenues of redress; with non-advised sales, no personal recommendation is provided and there is much less chance of redress if a decision leads to a poor outcome¹.

Which? said complaints about Targeted Support should fall within the Financial Ombudsman Service's compulsory jurisdiction, describing this as essential but not sufficient on its own¹.

What happens next

The FCA consultation closed to responses on 13 February 2025, the date Which? submitted its response¹. No decision has been made on what legislative changes, working with HM Treasury, would be needed to introduce the regime¹. Which? has recommended an FCA-led testing programme before any bespoke consumer protection regime is designed¹.