In March 2021 the Financial Conduct Authority (“FCA”) produced an updated joint guide for employers and trustees on providing financial support to employees and members. The guidance is an updated version of a document published in October 2020. The updated guidance will be particularly useful for employers that provide in-house pensions administration services.
Employers (particularly those with in-house pensions administration teams) may want to help their employees with financial matters relating to their pension arrangements. Employers need to exercise caution in this area as certain activities require FCA authorisation. The guide acts as a useful reminder of what activities require authorisation, as well as providing some examples for employers to consider.
The guide reminds employers that whilst they can help employees with general questions about their pension arrangements, they should not be issuing materials that promote a particular financial product. Such activity could amount to making a “financial promotion”, which should only be made by individuals or organisations authorised by the FCA. However, there is a useful exemption so that providing general information on an occupational scheme (provided it is not a stakeholder pension scheme or a group personal pension scheme) does not come under the restriction on promoting financial products. In terms of what amounts to “promoting” a particular product, providing factual information is fine, but employers should not provide information in a way that encourages an individual to make a particular decision.
There are also restrictions on providing “regulated advice”, which the guide sets out to remind employers of. Providing “regulated advice” can occur where employers answer employees’ questions on specific matters such as what investment fund they should choose, or whether they should transfer their benefits under an old scheme into the employer’s scheme. Again, this sort of activity requires FCA authorisation. Employers should therefore take steps to ensure that information is presented to employees in a generic manner. One suggestion that the guide makes is to signpost staff to publicly available resources for information such as the services provided by the Money and Pensions Service, including the Pensions Advisory Service, the Money Advice Service and Pension Wise.
The guide also refers to the potential for employers to “introduce” employees to regulated pension products if they steer individuals to buy a particular pension or retirement product operated by an FCA-regulated firm. This activity would be “arranging activity”. Such activity is a regulated activity and should not be carried-out by organisations or individuals that are not FCA authorised. Importantly, there is an exception where this direction is given to individuals for auto-enrolment purposes.
Whilst the guidance identifies actions that employers should look to avoid, it also indicates the sort of steps that employers can take that will not fall foul of the requirement to be authorised. The guide highlights the possibility, for instance, of signposting or arranging access to financial advice where employees are considering transferring their pensions (if the transfer value is more than £30,000). The guide also states that some employers may wish to contribute to the cost of that advice.
In summary, the updated guide does not change the legal position, but it does provide some helpful practical reminders of the sorts of behaviours that employers should look to avoid. The examples provided will also help employers when determining whether the action they are taking might require FCA authorisation.