The Financial Conduct Authority (FCA) is inviting feedback on plans to remove specific performance-based fees from the cost limits applied to workplace pension default funds. The initiative seeks to empower providers with more investment options over extended periods, potentially enhancing returns for members without compromising savers’ protections.
Under the proposed adjustments, providers could explore a wider array of investment strategies, which might lead to improved long-term performance and greater value for pension contributors. The regulator emphasized, however, that expanded options do not equate to permission for higher charges. Firms must demonstrate that any increased costs deliver measurable benefits to savers.
To accompany these changes, the FCA outlined protective measures including mandatory transparency requirements, equitable fee distribution among members, and rigorous oversight of private asset valuations. Both providers and independent governance bodies would require full access to relevant data to verify whether performance-linked fees justify their inclusion.
The new rules would harmonize the FCA’s framework with existing exemptions for trust-based pension schemes, where similar fee exclusions have applied since 2023. This alignment aims to support fair competition and simplify operations for providers managing both contract-based and trust-based funds.
Therese Chambers, the FCA’s executive director for enforcement and market integrity, stated: “People’s pension savings should maximize their potential. Savers expect providers to have the freedom to invest strategically for the long term when it benefits members—but this flexibility must never become an excuse for excessive charges. Any cost increases must be clearly justified by tangible advantages.”
Removing certain performance fees from the charge cap could unlock more investment avenues, potentially enabling providers to secure higher returns for members over time.
The FCA will accept submissions until 14 January 2027, with finalized regulations anticipated for summer 2027 after reviewing all responses. Ensuring any modifications to the charge cap enhance saver outcomes while upholding strong governance will remain critical throughout the process.
