CP19/15: Independent Governance Committees: extension of remit

Open consultation: CP19/15
15/04/2019
Consultation closes
15/07/2019
15/07/2019
Final rules
Q4 2019

Independent Governance Committees (IGCs) currently provide independent oversight of the value for money of workplace personal pensions provided by firms such as life insurers and some self-invested personal pension (SIPP) operators. IGCs oversee workplace personal pensions in accumulation, ie before pension savings are accessed.

Read CP19/15 (PDF)

Governance Advisory Arrangements (GAAs) are a proportionate alternative to IGCs for firms with smaller numbers of relevant customers and less complex relevant products. Where we refer to IGCs below, we also mean GAAs, unless we state otherwise.

Find out more about our existing rules for IGCs.

Proposed new IGC duty to oversee firms’ environmental, social and governance (ESG) policies

We propose a new duty for IGCs to report on their firm’s policies on ESG issues, consumer concerns and stewardship, for the products that IGCs oversee. Our proposals are to help protect consumers from investments that may be unsuitable because of ESG risks including climate change, make sure that consumer concerns are taken into account, and encourage good stewardship of investments.

We also propose related guidance for providers of pension products and investment-based life insurance products. This proposed guidance sets out how these firms should consider factors such as ESG risks and opportunities that can have an impact on financial returns, and to non-financial consumer concerns, when making investment decisions on behalf of consumers.

Our proposals address recommendations made by the Law Commission in its June 2017 report on Pension Funds and Social Investment. In some respects, our proposals go further.

Proposed new IGC duty to oversee the value for money of investment pathways

We propose to extend the duties of IGCs to include independent oversight of the value for money of their firm’s investment pathway solutions.

In January 2019, we proposed changes to our rules and guidance (CP19/5) to require drawdown providers to offer investment pathways to non-advised consumers entering drawdown. We said that we intended to extend the remit of IGCs to investment pathways.  

In this consultation, we propose rules and guidance that will require IGCs to assess the value for money of pathway solutions. This means assessing the costs and charges of pathway solutions relative to their quality, and the appropriateness of a pathway solution for consumers invested in it. As with workplace personal pensions, IGCs will have the power to raise any concerns directly with the Boards of firms, which firms must respond to.

Discussion on IGCs

This consultation also discusses what we have seen in published IGC annual reports and from our engagement with IGCs. We invite views on issues relevant to our planned work with the Pensions Regulator (TPR) on value for money in pensions.

Who this applies to

This consultation will be mainly of interest to:

  • firms that intend to provide pathway solutions and that provide workplace personal pensions
  • IGCs and GAAs
  • third party firms that provide GAAs or are considering whether to provide GAAs
  • consumer representative groups with an interest in ESG issues and pensions
  • all firms that provide pension products and all life insurers that provide investment-based life insurance products

This consultation will also be relevant to stakeholders with an interest in pensions and retirement issues, including:

  • individuals and firms providing advice and information in this area
  • distributors of financial products, in particular, retirement income products
  • trade bodies representing financial services firms
  • charities and other organisations with a particular interest in the ageing population and financial services

Consumers will also be affected by the proposals in this consultation. We welcome views from consumers on all our proposals.​​​

What you need to do

We want to hear your feedback on our proposals. Please send us your comments by 15 July 2019.

Online response form

You can also:

  • email your responses to [email protected]
  • write to John Reynolds, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN

Next steps

Once the consultation is closed, we will consider the responses and any other relevant developments before finalising our rules in Q4 2019.