The Financial Conduct Authority (FCA) is consulting on excluding certain fees linked to investment performance from the charge cap for default funds in workplace pensions it regulates. The proposed exemption would give providers greater flexibility to access private markets, including private equity, venture capital and private credit, where these investments could improve returns and value for savers over the long term.
Providers would have the option, rather than an obligation, to use the exemption, and should do so only where it serves savers' interests and they can meet the relevant protections. Investment decisions should weigh potential returns, risks and costs, with any higher charges justified by additional value for savers. Proposed safeguards cover transparency, fair allocation of fees between savers and scrutiny of private asset valuations. Providers and Independent Governance Committees would need sufficient information to assess whether performance fees offer value for money.
The proposals would bring FCA rules closer to the regime for pension schemes established under trust, where certain performance fees have been excluded from the charge cap since 2023. This alignment would reduce complexity for providers operating across both markets. The FCA currently expects to make final rules in summer 2027.