On 22 March 2019, the FCA published a Dear CEO letter concerning managing the risks of defined benefits to defined contribution transfers.
The Dear CEO letter explains that over the past year the FCA has carried out work to evaluate and reduce the risks of harm to consumers arising from the transfer of funds from their defined benefit (DB) schemes to defined contribution (DC) products.
The FCA reports that it has now completed its review of pension product providers and identified key drivers of harm. The FCA sets out in the Dear CEO letter its expectations as to what firms need to consider when designing, marketing and providing pension products. These fall within the following categories:
- Product design and target market;
- The information given to distributors;
- FCA permissions procedures;
- Management information;
- Remuneration structures;
- Governance and risk management; and
- Documentation and tools.
The FCA expects providers to gain assurance that they have appropriately implemented and fully comply with the recommendations of the FCA Product Intervention and Product Governance sourcebook, the Responsibilities of Providers and Distributors for the Fair Treatment of Customers guide and all relevant rules and regulations.