The FCA has proposed an extension to the oversight powers of independent governance committees to include value for money in drawdown investments.
Currently IGCs oversee the value for money of workplace personal pensions provided by firms like life insurers and some Sipp operators.
They act on behalf of consumers who are likely to be disengaged or less engaged with their pension savings.
In a consultation published today, the FCA says it wants to extend the remit of IGCs to include the value for money of their firm’s investment pathways solution in drawdown.
In January 2019, the FCA proposed changes to require drawdown providers to offer investment pathways to non-advised consumers entering drawdown.
At the time the watchdog said it intended to extend the remit of IGCs to investment pathways.
The FCA’s new proposal means IGCs would have to assess 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 would have the power to raise any concerns directly with the boards of firms, which they would then have to respond to.
The FCA also wants IGCs to report on their firm’s policies on environmental, social and governance issues for the products they oversee.
It says the proposals are to help protect consumers from investments that may be unsuitable because of ESG risks including climate change and to make sure consumer concerns are taken into account.
To compliment this, the FCA also proposes 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 that can have an impact on financial returns when making investment decisions on behalf of consumers.
The regulator points out that its proposals address recommendations made by the Law Commission in its June 2017 report on pension funds and social investment.
The consultation runs until 15 July with the finalised rules expected in the fourth quarter of 2019.