Just before Christmas, the Government called on all regulators – financial services and beyond – to set out how they plan to support the Government’s growth agenda.
We’ve now seen detailed responses from both the Pensions Regulator (TPR) and the Financial Conduct Authority (FCA). Together, these could have big implications for the financial services market.
Here, Aegon’s Head of Public Affairs, Kate Smith, and Public Affairs Director, Steven Cameron, pick out their key takeaways from the responses for advisers and employee benefit consultants (EBCs).
The Pensions Regulator’s support for growth
TPR published its response to the Government in March 2025, setting out five measurable commitments. TPR believes these commitments will ‘significantly boost business confidence, improve the investment climate, and foster sustainable economic growth’.
Here we look at implications for Defined Contribution schemes:
1. Increasing the value of pension funds
The Value for Money (VFM) Framework, once up and running, will deliver consistent, comparable and transparent data on investment performance, costs and charges, and quality of service. TPR has committed to designing the process and system for analysing the investment performance data, including scheme asset allocation. It will publish performance principles to make its expectations clear.
The VFM Framework will accelerate scheme consolidation, and TPR has committed to supporting poorly performing schemes to consolidate into a market of fewer, larger and better-run schemes.
2. Enabling productive finance
TPR understands that, for pension schemes to invest in a broad range of assets, they need access to a supply of attractive investment opportunities and the capability to assess these. It states ‘not all kinds of investments will be attractive to all pension schemes’.
TPR wants to understand what kinds of growth assets schemes find attractive and will share these insights with the Government. It also intends to raise the standards of trusteeship so that all schemes have the capability to consider and access a diversified range of investments.
3. Reducing unnecessary regulatory burden and releasing funds for investment
TPR has committed to reviewing its regulatory interventions and removing any unnecessary regulations, all while retaining a proportionate regulatory approach that delivers good outcomes for savers.
One significant development is a review of reserving requirements for master trusts, which will be welcomed by their ‘funders’. It claims removal of unnecessary regulations has the potential to free up unproductive capital for schemes and providers to use to support better member outcomes.
4. Driving growth through data and digital enablement
TPR believes that the use of digital, data and technology, including AI, can reduce the regulatory burden with benefits for the pension industry, market competition and savers. TPR’s blueprint for the future of digital, data and technology was published in October 2024 and is a five-year plan expanding on this, with its first focus being on data – including streamlining its own data requirements.
5. Supporting market innovation
In a new area for TPR, it wants to get closer to the pension industry and help support market innovation to drive growth. It plans to build an innovation hub, supporting industry to test emerging ideas and deliver new products, where these might benefit savers and the economy.
FCA support for growth
The FCA responded to the Government’s request in January, setting out its own commitments to support growth. This includes a focus on enabling more informed risk-taking.
It also highlighted areas where Government action could allow its growth agenda to go further – for example, by advancing digital identity authorisation and verification.
These themes were picked up in its five-year strategy, published in March 2025. This summarised its vision as ‘deepening trust, rebalancing risk, supporting growth, and improving lives’. Its four priorities are set out below:
1. Smarter regulator
With an aim to be predictable, purposeful and proportionate, the FCA is committing to improve its processes, as well as to embrace and invest in technology to become more efficient and effective. It promises less intensive supervision for firms ‘demonstrably seeking to do the right thing’ – in the interests of their clients. More firms will be granted direct contact points with the regulator.
Its post-Consumer Duty review should lead to the removal of unnecessary rules and prescription. Furthermore, it’s consulting on cutting back the volume of data returns, while authorisation processes will be digitised and simplified.
2. Supporting economic growth
The FCA intends to enable investment and innovation for the continued competitiveness of UK financial services.
In support of both smarter regulation and the growth agenda, the FCA aims to rebalance the approach it takes to risk. This covers regulatory, consumer, and market and firm risk. Regarding consumer risk, there’s a shift to focus on inaction leading to lost opportunities, such as consumers holding excessive cash rather than investing with the potential for higher returns.
The FCA wants to see more saved for retirement, too. While we believe the hike in employer National Insurance from 6 April 2025 makes an increase in employer auto-enrolment contributions unlikely right now, the adequacy of individual retirement savings needs to be considered.
Pension investment is at the heart of the Government’s growth agenda. There are references to Long-term Asset Funds which offer one route for pension funds to invest in illiquid assets, supporting economic growth with the potential for higher returns to members. We also hope for a join-up with the Government’s Pensions Adequacy Review which, while delayed, is still expected later this year.
Open Finance roadmap
Another initiative, building on the success of Open Banking, is the publication of an Open Finance roadmap within a year, with initial priority given to small business lending.
The FCA is also hoping that through proactively managing emerging issues and improved coordination with the Financial Ombudsman Service, it can prevent further significant FCA-led consumer redress exercises.
3. Help consumers navigate their financial lives
The focus here is on working with industry to boost trust, product innovation and to make sure people have the right information and support to take financial decisions.
The FCA repeatedly highlights how trust in financial services is essential, both for growth and for consumers. This is underpinned by the Consumer Duty, and the VFM Framework will make sure all workplace members are receiving value for money.
Targeted support
A major boost to consumer support will come from targeted support, particularly for those who don’t access financial advice. The FCA hopes this will allow consumers to make the most of their pensions and to invest with greater confidence.
One success measure is having ‘a higher proportion of consumers (with £10K+ in investable assets) holding mainstream investments, helping people save for later life’. A further consultation is due by mid-2025, so watch this space for our thoughts.
The financial journey of consumers
The FCA is also reviewing disclosure rules to provide the right information and support for customers. The FCA has just launched a second consultation around Consumer Composite Investment disclosures, and we’ll learn more in the coming months.
In a recent speech, FCA Chief Executive Nikhil Rathi talked of focusing on the financial journey of consumers, rather than isolated life events. This included a need to consider pensions, mortgages, savings, and housing wealth together.
He mentioned the UK’s challenges around home ownership and referenced how individuals in other countries can leverage pension savings to help buy their first home. This could be an interesting development for the regulator to discuss with Government.
4. Fighting financial crime
Financial crime impedes growth and leads to higher compensation levies. The FCA will go further to disrupt criminals, support firms to be an effective line of defence and retain its focus on identifying abnormal trading, including using generative AI, and help consumers avoid being caught up in scams.
Our summary
It’s good to see that both the TPR and FCA are aligning their activities and adapting their focus to support the Government’s growth agenda, while continuing to strive for good customer and member outcomes.
There’s clear agreement on the increasing importance of workplace pensions, not only to provide a retirement income, but to also support the UK economy. We expect radical reforms from the Pensions Investment Review and the Pension Schemes Bill, with a focus on scale and consolidation. Regulation needs to adjust to this, looking across initiatives to make sure they ‘join up’ while supporting better member retirement outcomes.
It’s important that TPR and FCA deliver regulatory alignment wherever possible. While the FCA has recently been leading the consultations on VFM, TPR is working on how to collect and compare pension investment performance data, and it’s vital this is applied to both trust-based and contract-based pensions.
We welcome TPR taking a leaf out of the FCA’s book when it comes to supporting innovation and competition, but the use of data and AI will move quickly. It will require nimble regulation to keep up, not least because savers’ expectations based on wider experiences may change. We also recognise and applaud the appetite from both TPR and FCA to remove unnecessary legislation and regulation as markets evolve.
What does this mean for advisers and EBCs?
The pace of regulatory change has arguably never been faster. The Government’s growth agenda and the regulatory response to this will lead to radical change in many aspects of financial services – from workplace pensions to support options, and the growing importance of data and AI.
Advisers and EBCs play an ever more important role in supporting their clients through these changes. It’s promising that regulators are seeking to streamline their approach to regulation with less intrusiveness for those firms seeking to do the right thing. However, we could also see an increased call for data and insights from both regulators to inform their future regulatory strategy.
While we have many signals into the direction of travel, there is much detail still yet to review. We'll continue to share our views on our Adviser Insights hub.