The Financial Conduct Authority (FCA)’s Consumer Duty principle, coming into force in July, will influence workplace pensions behaviour despite only being applicable for the retail financial sector, Sackers has warned.

Speaking at the PMI’s DC and Master Trust Symposium, Sackers partner, Helen Ball, stated that “in terms of ‘big bang’, [Consumer Duty] was always going to be really important”.

“[The Consumer Duty] is a standard of care and it applies to retail financial markets, so you might be sitting there thinking ‘I work for a general occupational pension scheme, this doesn’t apply to me’,” Ball said.

“But I think it will affect behaviours in the [occupational pensions] market; it’ll affect behaviours in the industry.

"When we sit and talk to trustees of master trusts, who are not themselves regulated in this way, they all are saying to us, ‘yes but it will affect us because whatever they do for the personal pension businesses, it’ll probably affect the master trusts too as they’ll probably want to do the same thing’.

"So, it will filter down and it's very likely it will affect how people approach things."

“We can’t see where it ends yet, but I think you can safely say that it is going to be relevant and it is going to affect behaviours in the market,” Ball added.

In July 2022, the FCA published the final rules and guidance for its Consumer Duty principle.

Under the duty, firms will be required to act to deliver good outcomes for retail customers, with the clarification on FCA's expectations expected to lead to more flexibility for firms to compete and innovate in the interests of consumers.

Under the new rules, firms will be required to provide "timely and clear" information that people can understand about products and services, rather than “burying key information in lengthy terms and conditions that few have the time to read”.

They will also be required to provide products and services that are right for their customers, and to focus on the “real and diverse needs” of their customers, including those in vulnerable circumstances, at every stage and in each interaction.

Although the FCA confirmed that for occupational pensions, the duty would not apply to pension schemes regulated by The Pensions Regulator, it acknowledged that respondents had raised an important issue where FCA authorised firms provide services to, or create products used by, TPR regulated schemes.

In light of this, it clarified that FCA authorised firms creating a product and operating pension schemes for occupational pension scheme trustees would need to comply with the duty if they can determine or materially influence retail customer outcomes.

It also amended the 'retail customer' definition to be clear that it includes the beneficiaries of trust-based pension schemes, where an FCA-authorised firm provides services to a trustee.

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