The FCA set out its proposals for targeted support to help consumers make informed pensions and investment decisions, in CP25/17 on 30 June 2025.
The proposals build on those in CP24/27 (December 2024), which focussed on targeted support for consumers with defined contribution pension products. Most proposals from this earlier consultation are being taken forward, with a proposed single framework for pensions and investment products.
Alongside CP25/17, the FCA published three research notes covering: the relationship between financial advice and wealth, and consumer understanding of targeted support in pensions and investments.
In this article
What does this mean?
The FCA proposes introducing a new form of support, which would enable firms to provide suggestions designed for groups of consumers with common characteristics, on a permissive basis.
The regulator proposes that firms would deliver targeted support in scenarios where they have reasonable grounds to consider that this would deliver better outcomes for customers.
Delivering targeted support: a four-stage process
The FCA outlines a four-stage process for delivering targeted support:
Pre-define situations: Firms identify specific financial situations consumers may face, where targeted support could help achieve better outcomes.
Pre-define consumer segments: Firms define groups of consumers with common characteristics relevant to the identified situation.
Pre-define ready-made suggestions: For each consumer segment, firms develop a ready-made suggestion tailored to the group’s shared characteristics.
Deliver the ready-made suggestion: Firms verify that an individual consumer aligns with a pre-defined segment, and deliver the corresponding suggestion.
The FCA provides examples of situations where targeted support may be offered, such as:
Under-saving for retirement: Currently firms can warn a consumer that they may be under-saving for retirement. Under targeted support, a firm could suggest an alternative pension contribution rate.
- Pension access decisions: Instead of solely providing factual information on decumulation options, firms could suggest more effective withdrawal strategies.
- Consumers ready to invest: Currently firms can suggest that consumers may be in a position to start investing. Under targeted support, a firm could suggest a specific investment product.
Conduct standards
The FCA proposes a framework based on existing requirements, underpinned by the Consumer Duty.
It sets out key components of the Duty that will be relevant for firms when designing and delivering targeted support, and highlights the importance of considering customers with characteristics of vulnerability, in line with FG21/1.
The FCA clarifies the scope of products to which targeted support can apply, proposing that high-risk investment products be excluded. This would exclude any investment product subject to marketing or distribution restrictions under FCA rules (e.g. Non-Mass Market Investments, Restricted-Mass Market Investments), although diversified portfolios with limited exposure may still be suggested.
The regulator also proposes that targeted support cannot be used to suggest that consumers consolidate any pensions out of or into a particular product, or to recommend a particular annuity to a consumer.
The FCA also seeks views on whether the proposed rules are future-proof and enable firms to, for example, use technologies such as artificial intelligence responsibly.
Costs and charges
The FCA is maintaining its proposals in CP24/27 that firms can provide targeted support free of charge, or charge for it if they wish. Firms may use cross-subsidisation to recover costs (provided they comply with the Consumer Duty); commission payments would not be allowed.
The FCA says most firms plan to offer targeted support services at no additional cost to customers, with some noting they would meet the cost through benefits of increased consumer engagement and retention. Some firms are considering cross-subsidisation, or specific fee structures, such as a breakdown of fees for their platform service, targeted support, and asset management.
Complaints and redress
The FCA proposes that targeted support falls under the jurisdiction of the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme. Customer complaints would be subject to the complaints handling rules in the Dispute Resolution sourcebook.
The regulator acknowledges that firms have asked for certainty on how complaints will be assessed by the FOS. It commits to working with the FOS on case studies and/or guidance, showing how the framework may apply in practice.
Authorisations and eligibility criteria
The Government is due to consult on proposed amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, to create a new specified activity of targeted support. Firms will need to apply for a Part 4A permission to provide targeted support.
Where a firm is only authorised to provide targeted support, the FCA proposes to treat it as a new form of ‘arranger’ firm and subject to Chapter 3 of the Interim Prudential Sourcebook for Investment Business (IPRU-INV 3), with a minimum capital requirement of £500,000. All FCA-prudentially regulated firms that choose to deliver targeted support will need to hold this level of regulatory capital at a minimum.
The FCA identifies risks with appointed representatives delivering targeted support, and says it is for the Treasury to confirm whether they can do so.
Simplified advice
The FCA confirms that it plans to separately review its rules to clarify the flexibility firms have to provide ‘simplified advice’ (a personal recommendation focused on a narrow specific need).
It plans to consult on amendments to COBS 9/9A to create a clearer distinction between simplified and more holistic advice.
What do firms need to do?
Consider whether, and how, to integrate targeted support into their businesses, including any necessary changes to their operating model.
Pre-define consumer segments and financial situations where targeted support may be offered.
Consider how to embed Consumer Duty and robust governance and controls throughout the support journey.
Firms should consider whether and how they wish to integrate targeted support into their businesses.
Firms seeking to offer targeted support will need to take a number of strategic and operational actions. First, they must design targeted support journeys by pre-defining consumer segments and situations where targeted support could help consumers achieve better outcomes. This involves identifying common characteristics that provide a reasonable basis to consider the ready-made suggestion suitable for consumers aligned with the segment. Firms must ensure these segments are defined at an appropriate level of granularity, and carefully consider the data they would need to align consumers with a segment.
Second, firms must embed the Consumer Duty throughout the support journey. This includes acting in good faith, avoiding foreseeable harm, and enabling consumers to pursue their financial objectives. Communications must be clear, tailored to the segment, and disclose the nature of the support, including any assumptions made. Firms must also monitor outcomes and review their support services regularly to ensure they remain appropriate and deliver fair value.
Consideration of existing obligations under the Duty is also important to assess, given the FCA has previously said that firms taking an unduly conservative approach to ‘guidance’ may not deliver good consumer outcomes. The CP notes that while firms are not required to offer targeted support to comply with the Duty, doing so could be an expedient way to meet their cross-cutting obligations under the Duty.
Finally, firms must establish robust governance and product oversight. This includes aligning with PROD rules, maintaining accurate records, and ensuring that any product forming part of a suggestion remains suitable over time. These actions will help firms deliver high-quality, scalable support while maintaining regulatory compliance and consumer trust.
“These once-in-a generation reforms will help people navigate their financial lives and give them greater confidence to invest. This is a win-win for consumers and firms alike.”
Next steps
The consultation closes on 29 August 2025. The FCA aims to publish a policy statement by the end of 2025, and a further consultation paper on simplified advice in January 2026.
The Government is due to consult on proposed amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, to create a new specified activity of targeted support.
Contacts
David Croker
Sonia Styles
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