Pensions industry expresses strong support for FCA protection of vulnerable customers

Out-Law News | 12 Nov 2020 | 11:46 am | 1 min. read

The pensions industry has backed the UK Financial Conduct Authority’s (FCA) approach to protecting vulnerable customers, despite recent proposals being likely to lead to increased costs.

The majority of delegates at a recent webinar focusing on the FCA’s recent consultation on the treatment of vulnerable customers expressed support for the aim of wanting vulnerable consumers to experience outcomes that are as good as those for other consumers.

Pensions expert Simon Laight of Pinsent Masons, the law firm behind Out-Law, said this aim equated to good outcomes for all consumers, irrespective of their decision-making capabilities.

Asked if the FCA was right to set the bar this high, the majority of delegates said it was and that pension providers should have to deliver good outcomes for all, whatever the customer’s ability to make reasonable decisions about pension savings and investments.

When asked if the cost to pension providers of implementing this outcome would significantly impact business models, the majority of webinar delegates confirmed that in their opinion the implementation costs would not materially impact their business model.

Lorna Khemraz


The message for pension providers is to plan well and invest in a strong programme around fair treatment.

“We see strong support within the industry for the FCA's initiative to ensure that vulnerable customers are protected, despite the costs involved. This is a strong, caring message from the pensions industry,” Laight said.

However, delegates expressed concern around the regulator’s initiative legitimising vexatious customer complaints, which will see the Financial Ombudsman Service using FCA guidance when assessing whether firms have met the standards expected of them.

The majority of delegates thought that the introduction of the FCA’s guidance would open the floodgates to customer complaints.

Pensions expert Lorna Khemraz of Pinsent Masons said: “There is concern that the guidance might make it easier for customers to complain when their choices around pension savings and investments haven’t gone well. With the benefit of hindsight, the customer might claim that their decision was made at a time of vulnerability and that the firm should have provided a higher level of care than it did to ensure a good outcome for the customer.

“Therefore, the message for pension providers is to plan well and invest in a strong programme around fair treatment. Having a robust process helps you demonstrate compliance with the guidance if and when unfair treatment complaints start to flow,” Khemraz said.

The FCA’s consultation closed at the end of September and finalised guidance is expected later this year or in early 2021. The regulator noted that the proportion of the UK population who are considered vulnerable has risen substantially due to the coronavirus pandemic, and said this made its guidance on the treatment of vulnerable customers more relevant than ever.