Navigating the FCA's regulatory priorities for pensions

Pensions are not a niche concern - they are central to the financial lives of almost everybody in the UK, with 69% of non-retirees holding a pension in accumulation. 

With over £3tn of assets in defined benefit and defined contribution schemes, the pensions market is not only a retirement safety net but a critical engine of UK growth.

Yet that vast system is creaking: ageing technology, a widening advice gap, and a market undergoing profound government-driven reform create both acute risks of consumer harm and genuine opportunities for those firms willing to move first.

The FCA's new Regulatory Priorities report - replacing more than 40 portfolio letters - is addressed squarely at Boards and Chief Executives, who are expected to read it carefully and act where necessary. The regulator's goal is explicit: less intensive supervision for firms doing the right thing, and stronger, faster action where harm is greatest.

This briefing sets out the FCA's four headline priorities for the pensions sector, explains what is genuinely new in the regulator's thinking, and offers practical steps your firm should take now.

Priority 1: Ensuring well-run schemes that provide value for money to savers

Applies to: Life insurers, SIPP operators, investment platforms, advisers, wealth managers, and asset managers involved in pension business.

Good value, well-run schemes are fundamental to an efficient pensions market that delivers well for consumers. In the FCA's 2024 Financial Lives survey, 56% of adults with a defined contribution pension in accumulation said they had over £10,000 in their combined pension pots, up from 49% in 2020 - meaning the stakes for getting value for money right are higher than ever. 

Together with The Pensions Regulator and the UK Government, the FCA is developing a new framework to enable a consistent focus on value for money across all pension schemes, with proposed revisions to the draft Value for Money ('VFM') Framework published to make the way arrangements are assessed and compared more objective and robust across the market.

The FCA will finalise VFM framework rules (subject to legislation and feedback), giving firms time to implement system changes before the 2028 launch. Whilst the VFM framework focuses on workplace schemes, the FCA also sees opportunities to improve the price and value of non-workplace pensions and will be publishing findings from its review into pensions and savings products which allow investment in unit-linked funds.

What is new

Previous FCA portfolio letters for the pensions sector addressed value for money in relatively general terms and with limited structural consequence. The workplace pensions market will be transformed over the coming years through a government focus on scale and greater competition based on value, and providers and their advisers now need to plan for the significant operational and commercial impact of initiatives such as VFM.

The introduction of a formal scale test - linked to contractual override powers in the Pension Schemes Bill - is an entirely new legislative mechanism that goes well beyond anything previously communicated. The FCA will support the development of the framework proposed in the Pension Schemes Bill for member transfers through contractual override and assessment against the scale test - a power of intervention with no precedent in prior supervisory communications.

Practical steps for firms

• Engage with the FCA as it finalises the VFM framework and rules permitting transfer of savers: provide feedback on the draft framework and get ready to implement - consider what you will need to provide accurate data.
• Work to ensure savers will not remain in poorly performing workplace schemes: in advance of the VFM framework, plan to address schemes unlikely to be providing value, for example, through asset reallocation or transfer of members.
• Plan for the introduction of the scale test: work with the FCA as you consider business changes or acquisitions, and consider the operational impact on your business.
• Monitor the unit-linked price and value review findings, expected in Q2 2026, and assess your products' fair value position now - do not wait for the findings to be published before undertaking an internal review.

Priority 2: Encouraging effective support for consumers

Applies to: Firms providing or advising on personal pensions, group personal pensions, and retirement income products.

Pensions, especially retirement decisions, present consumers with complex choices; many struggle and rarely seek professional advice, leading to low engagement and decisions that are not fully informed. This can have a significant negative financial impact: in 2024, only 25% of DC pension holders aged 45 and over had a clear plan for how to take their money. Pension providers play a critical role in helping consumers make informed decisions, and as more people rely on DC pension savings, firms must provide timely, effective support at key stages of the retirement journey.

The FCA has been progressing the Advice Guidance Boundary Review and has set out a new regulatory framework for targeted support that will represent a fundamental shift in the support available to consumers, with the gateway for applications opening on 2 March 2026. Successful applicants will be able to deliver targeted support from April 2026 when the final rules come into effect, and the FCA expects firms to iterate their propositions as the framework beds in. The FCA has also started to consult on reforms to better support consumers using digital pension planning tools and consumers making non-advised decisions to transfer DC pensions.

What is new

Previous FCA communications on this theme focused primarily on warnings about inadequate advice and the risks of non-advised transfers. The FCA is now prioritising work to enable firms to confidently deliver support and will develop a policy framework to implement default pension benefit solutions in decumulation - a concept that was not part of earlier supervisory messaging and which signals a major structural change in how the retirement income market will be expected to function. The FCA also expects that consumer engagement will increase once pensions dashboards are available, and the regulatory framework must evolve to meet that shift. The specific focus on non-advised DC transfers as a policy matter - rather than purely a supervisory risk - is also a new direction.

Practical steps for firms

• Consider what support consumers might need to better understand and make decisions as the market changes, whether due to the Pension Schemes Bill or wider events and market volatility.
• Apply for permission to provide targeted support now if your firm intends to use the new framework - the gateway is open and pre-application support is available from the FCA.
• Engage with Consultation Paper 25/39 on reforms to digital pension planning tools and non-advised DC transfers, and take feedback into account before rules are finalised.
• Consider how your support model may need to evolve in response to potential changes in consumer behaviour driven by pensions dashboards.
• Engage with the FCA on whether there are any other aspects of regulatory reform that should be considered, as the FCA welcomes views from firms and other stakeholders.

Priority 3: Supporting growth and innovation

Applies to: Firms that provide, manage, and support the provision of pension schemes and retirement income products.

Supporting growth and innovation is a key part of the FCA's strategy, and the regulator wants to support growth by enabling firms to innovate and adapt whilst ensuring its regulatory approach remains proportionate. The FCA wants to remove unnecessary barriers to investing in private markets and to support firms in delivering against the Mansion House Accord and government initiatives. Investment in private assets has the potential to offer greater returns over the long term and provide benefits of diversification, though private assets also carry particular risks which need to be carefully managed.

The FCA will consult on the pension charge cap and performance fees, with the aim of facilitating access to a broader range of asset classes whilst maintaining an appropriate degree of consumer protection. The FCA will also lead work to ensure that valuation processes used by firms servicing pension schemes are robust, including through cross-cutting supervisory work with asset managers and by working internationally to update IOSCO valuation recommendations.

What is new

The FCA's prior portfolio letters for this sector said relatively little about investment strategy and private markets access, beyond general Consumer Duty and governance obligations. The explicit alignment with the Mansion House Accord and government growth initiatives is new and represents a deliberate integration of the FCA's regulatory agenda with the Government's broader economic objectives. The forthcoming consultation on exempting performance fees from the pensions charge cap is a significant regulatory relaxation - one that was not signalled in any previous sector-specific FCA communication, and which could materially reshape how pension schemes are structured and incentivised.

Practical steps for firms

• Review your approach to asset allocation, including opportunities for investment in private assets where this is judged to be in the best interests of savers, and pay attention to the recommendations made in the FCA's review of private market valuation practices.
• If you are investing in a broader range of asset classes or paying performance fees, consider how your control framework may have to evolve.
• Engage with the forthcoming consultation on the pension charge cap and performance fees in Q2 2026 - this is a genuine opportunity to shape the rules your firm will operate under.
• Experiment with AI using the FCA's sandbox services and Innovation Pathways, including the Supercharged Sandbox for smaller market participants, and monitor the AI Live Testing evaluation report expected by the end of 2026.

Priority 4: Modernising pensions and long-term savings

Applies to: Life insurers and other firms with legacy pensions and long-term savings products.

Longstanding issues related to legacy systems and products can prevent firms from better serving their consumers, cutting costs, and embracing innovation - including ageing systems, difficulty contacting consumers, and consumers locked in older products or funds with limited flexibility to change. The FCA wants a conversation with firms and stakeholders to find innovative ways to tackle these issues, which span regulatory, legislative, product, and process challenges.

Specific issues already identified include the "goneaways" problem where firms are often unable to find and connect with consumers, product and administration complexity, the proportionality of Part VII (FSMA 2000) and Part VIII (Friendly Societies Act 1992) transfers, and challenges for with-profit funds. The FCA will also continue to focus on improving the regulatory framework in the SIPP market, so consumers can buy a broad range of SIPP products with confidence.

What is new

This priority is the most distinctly new element of the FCA's pensions agenda. Legacy systems and the "goneaways" issue have long been acknowledged as industry challenges, but the FCA has not previously committed to working collaboratively with firms and stakeholders to resolve them through potential regulatory and legislative intervention. The consultation on rules relating to due diligence and the handling of pension scheme money and assets in the SIPP market, following the Discussion Paper published in December 2024, represents a targeted regulatory reset for the SIPP market - one that follows a period during which the FCA's supervisory approach to SIPPs had been relatively reactive.

Practical steps for firms

• Engage with the FCA now to discuss the barriers and longstanding issues that increase costs and prevent firms from improving consumer outcomes.
• As the FCA develops solutions, give feedback and be willing to test ideas - early engagement will give firms the opportunity to shape the outcome.
• SIPP operators should prepare for the forthcoming consultation on due diligence obligations and the handling of pension scheme money and assets, and review their current frameworks against existing FCA expectations in advance.
• Begin mapping legacy product populations now, identifying consumers who may be "goneaways" and the obstacles preventing contact, so your firm can engage constructively when the FCA's external roundtables commence in Q2 2026.

Additional areas requiring attention

Beyond the four headline priorities, firms should note the following:

• Government initiatives: The FCA will continue to support the delivery of government measures set out in the Pension Schemes Bill and the wider government reforms, and will work to ensure alignment between the contract and trust-based sides of the market as these reforms take shape over 2026.
• Operational resilience: Alongside the PRA, the FCA will introduce new rules for reporting operational incidents and information on material third parties following CP24/28, engaging with firms during the implementation period.
• SMCR reform: Working with HM Treasury and the PRA, the FCA is reviewing the efficiency and effectiveness of the Senior Managers and Certification Regime with the aim of halving its regulatory burden.
• Ongoing supervisory focus: The FCA will continue to assess poor product governance, complex charging structures, and lack of transparency, and will consider the use of supervisory interventions or enforcement where serious misconduct is identified.
• Retirement income market data: In 2024/25, 961,575 pension plans were accessed for the first time from FCA-regulated firms - an increase of 8.6% compared to the previous year and 61.3% compared to 2020/21 - underlining the urgency of getting decumulation support right.

Conclusion

The FCA's inaugural Regulatory Priorities report for the pensions sector is more than a supervisory checklist - it is a statement of intent from a regulator navigating one of the most consequential periods of reform the UK pensions market has ever seen.

The market is undergoing significant transformation, largely driven by government reforms, and the FCA will continue to ensure consumer needs remain central whilst supporting firms to grow and innovate.

What distinguishes this report from previous FCA pensions communications is its ambition on multiple fronts simultaneously: a formal VFM framework with teeth, a decumulation default framework that could reshape how millions of consumers access their retirement savings, a charge cap relaxation to unlock private markets investment, and a collaborative programme to tackle longstanding legacy technology and product issues that the industry has long considered intractable.

Yet the FCA's enforcement posture has not softened. Where the FCA identifies serious misconduct - whether in product governance, charging structures, transparency, or the oversight of appointed representatives - it has made clear it will use all tools available to it, including supervisory interventions and enforcement.

Firms that read this report and treat it as background noise do so at their peril. Those that engage early - with the VFM framework, the targeted support regime, the charge cap consultation, and the FCA's modernisation agenda - will not only manage their regulatory risk more effectively but will be better placed to compete in a pensions market that is being fundamentally redrawn. The FCA has set out its stall. The question now is which firms will step forward to shape what comes next.