Performance-linked fees are common in private markets, including private equity, venture capital and private credit. The proposed change would give providers greater flexibility to access a broader range of investments where this could help improve long-term returns and value for savers.
The FCA is clear that greater flexibility is not a licence to charge more. Providers should carefully weigh potential returns, risks and costs when making investment decisions, and any higher charges should be justified by the additional value delivered to savers.
Alongside the proposed flexibility, the FCA is proposing safeguards covering transparency, fair allocation of fees between savers and scrutiny of how private assets are valued. Providers and Independent Governance Committees would need access to the information necessary to assess whether performance-linked fees offer value for money.
Therese Chambers, executive director of enforcement and market integrity at the FCA, said: 'People's pension savings should work hard for them. We want providers to have greater choice over how they invest for the long term where this can deliver better outcomes for savers.
'But greater flexibility is not a licence to charge more. Any higher charges must be justified by additional value, with firms carefully weighing returns, risks and costs when deciding what is in savers' best interests.'
The proposals would bring FCA rules more closely into line with the regime for trust-based pension schemes, where certain performance-linked fees have been excluded from the charge cap since 2023.
Greater alignment would support competition and choice and reduce unnecessary complexity for providers operating across both parts of the market.
The proposals would give providers an option, not an obligation, to use the exemption. Providers should do so only where it is in savers' interests, and they can meet the relevant protections.
The FCA is seeking responses by 14 January 2027 and currently expects to make final rules in summer 2027 following consideration of feedback.
This work is a priority under the FCA's Pensions Regulatory Priorities (PDF) and forms part of the wider pensions reform.
In 2023, the Government changed the rules so certain performance fees sit outside the limit on charges, with protections for members. The proposals build on changes made for trust-based schemes in 2023, while reflecting developments in private markets and strengthening protections in areas such as how investments are valued.
The FCA enables a fair and thriving financial services market for the good of consumers and the economy. Find out more about the FCA .
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