What happened?
The Financial Conduct Authority (FCA) has urged pension providers to review legacy unit-linked non-workplace pensions and savings products. The regulator’s review indicated that consumers holding these older, closed products frequently receive poorer value than those invested in modern alternatives.
Key issues highlighted include complex fee structures, outdated product designs, and poor quality or incomplete data, which directly hinder firms’ ability to assess and guarantee fair value.
Why does it matter?
The findings carry significant weight under the Consumer Duty, which mandates that all products—including closed books—must consistently deliver good outcomes. When product data is weak or incomplete, firms cannot reliably evidence that their historical charging models represent fair value today, leaving customers exposed to poor financial outcomes.
Firms are expected to adopt good practice examples from the review, such as simplifying ranges, capping legacy fees, and proactively transferring clients to modern, high-value alternative products.
Who is affected?
Providers of unit-linked pensions, life insurance companies holding closed-book portfolios, trustees, and retirement wealth managers are affected.
Key risks
Firms ignoring legacy pension reviews face substantial compliance and commercial risks:
- Severe regulatory penalties for breaches of the Consumer Duty price and value outcome.
- Reputational damage and loss of client assets due to poor value disclosures and complex charges.
- Operational bottlenecks in correcting incomplete or low-quality historical customer records.
Actions to take
Pension and wealth providers must take immediate corrective measures:
- Conduct a rigorous price and value audit across all legacy and closed-book portfolios.
- Implement data-remediation projects to address incomplete or poor-quality historical customer records.
- Develop clear plans to simplify charging structures, cap fees, or transition savers to modern alternatives.
Wider implications
This review aligns with the FCA’s broader modernising agenda for retirement savings, including pensions dashboards and targeted advice reforms, indicating that closed-book portfolios will remain under intense regulatory scrutiny indefinitely.
Recommendations
We recommend establishing an independent, data-driven fair value assessment framework and deploying specialist resources to execute legacy book simplification and data remediation.
TCC’s experts help firms assess fair value, evidence customer outcomes and understand what the FCA’s findings may mean for legacy pension and savings products. We support firms in identifying where action may be needed across closed-book and legacy portfolios and in shaping practical responses aligned with Consumer Duty expectations.
Supporting sources
Frequently asked questions
What did the FCA review of legacy pension products find?
The review found that older, closed unit-linked pensions often deliver poorer value than modern equivalents, driven by complex fees, legacy designs, and incomplete firm data.
What actions can firms take to improve legacy pension value?
Firms can simplify product ranges, cap or reduce charges, audit historical data, and transfer customers to newer, better-value products.
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