UK: Guidance for Employers on Providing Support with Retirement Planning – SHRM

​The U.K.’s Pensions Regulator and the Financial Conduct Authority (FCA) have published a joint guide for employers and trustees on providing support with retirement planning without needing to be subject to FCA regulation. In a separate but related development, the Pensions Ombudsman has published a factsheet on the approach it will take when considering complaints by members in situations where employers or trustees have facilitated access to independent financial advisors as part of retirement planning support. 

The guide by the FCA and Pensions Regulator covers a number of areas, including: 

  • What information can be communicated about pension schemes without employers and trustees being in breach of financial services rules about financial promotions.
  • What information can be provided about the scheme or related retirement options without crossing the line into “advising.”
  • What help can be given to facilitate access to regulated financial products and regulated advice without crossing the line into “arranging.” If “advising” or “arranging” is undertaken, this potentially triggers a requirement to be authorized by the FCA.

The FCA and the Pensions Regulator previously published a joint guide on this topic in 2017. Most of the bones of the 2017 guide are replicated in the new guide. The new guide has, however, been expanded to cover some new areas, including the type of information that should—and shouldn’t—be provided to members where defined benefit transfer values are being provided and with further detail on what employers and trustees can do to facilitate access for employees and members to regulated advice.

The guide confirms that unsolicited transfer values may be provided but recommends that this is an area in which trustees should exercise caution. If additional information is being provided to members—for example to provide context for a transfer value—the guide recommends, among other things, that any contextual figures that are being provided should be factual rather than illustrative. In other words, they should not be based on any underlying assumptions.

Facilitating Access to Regulated Advice

The guide recognizes that employers and trustees may be in a better position to identify suitable regulated firms and better able to negotiate good terms with that advisor than individuals and contains guidance on how employers and trustees can go about doing this. The guidance helpfully confirms that a “one-off” exercise by employers or trustees of identifying suitable regulated advisors and providing a list to members is, by itself, unlikely to constitute a regulated activity or give rise to the risk of penalties under the financial services legislation. The guide also recommends that trustees and employers should generally be facilitating access to independent advisors—advisors covering the whole of the market—as opposed to restricted advisors. 

Separately, the factsheet recently published by the Pensions Ombudsman has provided some comfort that, provided employers and trustees have taken appropriate steps as part of putting together any lists or panels of advisors, complaints brought to the Pensions Ombudsman on the basis of allegedly poor advice provided by an advisor on such a panel would be difficult to bring successfully against employers or trustees. The factsheet contains a list of areas that the Pensions Ombudsman would typically consider when looking at complaints in this area, which serves as a useful checklist for employers and trustees in order to mitigate their risks of successful Pensions Ombudsman claims being brought against them in this area.

Recommended Actions

Employers and trustees may wish to review the support currently offered to members and employees to check that it consistent with the new guide. In particular, trustees may want to consider whether their current processes around transfer values comply with the guidance.

Employers and trustees who are considering facilitating access to regulated advice for their employees or members, or who have already put in place measures to do this, should review the new guide, together with the Pensions Ombudsman’s factsheet, to ensure that they have mitigated their legal risks as far as possible.

Jonathan Sharp and Sarah Hickling are attorneys with Baker McKenzie in London. © 2021 Baker McKenzie. All rights reserved. Reposted with permission of Lexology.