FCA Proposes Exempting Some Pension Performance Fees From Charge Cap

The Financial Conduct Authority (FCA) is proposing to let providers of workplace pension schemes it regulates exclude certain performance-linked fees from the charge cap for default funds. The proposed flexibility could allow providers to invest in a broader range of assets, including private equity, venture capital and private credit, where they believe this could improve long-term returns and value for savers. The FCA stressed that the proposal would not give providers permission to charge more without justification. Firms would need to weigh potential returns against risks and costs, and show that any higher charges are supported by additional value for savers. The proposed safeguards would cover transparency, fair allocation of fees among savers and scrutiny of private-asset valuations. Providers and their Independent Governance Committees would need information to assess whether the fees offer value for money. The exemption would be optional, not an obligation, and providers should use it only when it is in savers’ interests and they can meet the protections. The proposal would bring FCA-regulated workplace pensions closer to trust-based schemes, where certain performance-linked fees have been outside the charge cap since 2023. The FCA said greater alignment could support competition and choice and reduce complexity for providers operating across both parts of the market. The consultation, CP26/40, is open for responses until 14 January 2027. The FCA currently expects to make final rules in summer 2027 after considering feedback. The work is part of the regulator’s Pensions Regulatory Priorities and wider pensions reform.