Matthew Connell discusses a new government and a possible change in apporach to regulations
New government and a Financial Services and Markets Bill
The month began with a new government,with an immediate emphasis on economic growth, as the new Chancellor, Kwarsi Kwarteng reportedly briefed Treasury officials that economic growth has a higher priority than controlling inflation or government spending. Tom Scholar, the Permanent Secretary to the Treasury, was sacked in an unusual move that is seen as symbolising a new approach to economic policy. One thing the Treasury is likely to miss without Mr Scholar, however, is his extensive experience with economic diplomacy.
One area where the government’s growth agenda will be tested will be the passing of the Financial Services and Markets Act. This piece of regulation will replace European law on financial services and is expected to put more rule-making powers in the hands of regulators, but at the same time give politicians the power to exert more influence over regulators, including a power for the Treasury to overrule the Financial Conduct Authority (FCA) in exceptional circumstances.
The change in legislation is likely to leave more regulation purely in the FCA Handbook – for example, while professional indemnity requirements were baked into EU law, under the draft legislation, they only appear in detail in the FCA rules, being supported by some very general statutory instruments. This will give more scope for reform, if the will is there to deliver it.
FCA consultation on DB pension transfer redress
The FCA published its proposals for a new approach to calculating redress payments for successful complaints on pension transfers.
Most of the changes are technical tweaks to the current rules, for example a proposal to introduce derivative pricing techniques to calculate DB pensions that have caps and/or collars for inflation growth.
However, one key decision that impacts the FCA review of the British Steel Pension Scheme (BSPS) is on how compensation payments can be made. The original proposal was for payments to be made as a lump sum, which ran counter to the assumption that much of the harm done to members transferring out of the scheme was the loss of a guaranteed income.
The FCA has changed its stance slightly, saying that firms can offer compensation in the form of an income, but that the former BSPS member must be able to choose whether they want their compensation to be in the form of an income or a lump sum.
The FCA published its final rules for the Consumer Duty at the end of the July. These are designed to focus firms on four key outcomes for consumers around price and value, products and services, communication and understanding and consumer support. Most of the implementation deadlines are in 2023, but by the end of October 2022, firms’ boards should have plans in place, including a method for overseeing delivery.
Matthew Connell is director of policy and public affairs