On 30 June 2025, the Financial Conduct Authority (FCA) published a consultation paper (CP25/17) on its proposals for ‘targeted support’ in pensions and retail investments. We initially reported on this consultation here. The proposals are aimed at closing the UK’s advice gap by enabling firms to provide ready-made suggestions to groups of consumers in common circumstances and, where relevant, with common characteristics, thereby helping them make better financial decisions.

To enable the implementation of targeted support, on 15 July 2025, HM Treasury published a Policy Note (together with a draft statutory instrument) setting out its proposed changes to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to create a new specified activity for providing targeted support.

In this briefing, we consider the key proposals for targeted support in further detail and highlight the areas firms should consider when assessing the potential impacts on their business and clients.

A new framework for designing and delivering targeted support

The proposed targeted support framework will consist of a permissive regime for firms. Firms will not be required to provide such services, but where they decide to offer targeted support, the FCA wants firms to deliver ‘better outcomes’ to their clients than if such support was not provided.

In practice, firms will need to act with due skill, care and diligence in designing their targeted support offering by pre-defining:

• situations in which they can provide targeted support,
• consumer segments, ie, groups of consumers in a common situation and, where relevant, sharing common characteristics; and
• ready-made suggestions for each consumer segment within each situation.

The FCA has clarified that firms should have the option to pre-define situations and consumer segments as ‘one fluid process’ (rather than sequentially), ie, there is no fixed order firms should follow when considering pre-defined situations and consumer segments.

This overarching framework will be supported by the application of existing regulatory requirements (including product governance rules and the Consumer Duty) and new conduct standards governing the targeted support journey from design through to delivery and review, as further detailed below. The majority of these changes will be set out in a new section (COBS 9B) of the FCA’s Conduct of Business Sourcebook (COBS).

In addition, the provision of targeted support will be introduced as a new regulated activity in the RAO, which means that all firms (even those with an existing permission to provide advice) will need to seek a separate permission to provide targeted support.  

The new framework will inevitably require significant changes to firms’ internal and client facing processes in order to ensure targeted support can be delivered, monitored and reviewed in compliance with the applicable regulatory framework.

Creation of a new regulated activity for targeted support

HM Treasury’s proposed amendments to the RAO create a new specified activity for providing targeted support and provide that when a firm provides targeted support it is not ‘advising on investments’ under article 53. HM Treasury is seeking feedback on whether the new targeted support activity is sufficiently distinct from article 53.

Specifically, it is proposed that a new article 55A will be introduced to govern the provision of targeted support. A firm will be carrying out the new activity when it uses information about an individual to group the individual with other individuals sharing similar characteristics and/or circumstances, and the firm makes a recommendation to that individual regarding a relevant investment that is presented as suitable for an individual in that group. The description of the activity also makes reference to the firm making a statement to the individual specifying that the recommendation is not based on a comprehensive consideration of the individual’s characteristics and circumstances, that the recommendation is not specific to the individual, and setting out any characteristics and circumstances of the group used as the basis for the recommendation. Personal recommendations that are not provided in line with the definition of targeted support will continue to be regulated as advice on investments under article 53.

The proposed article 55A will not change the definition of a ‘personal recommendation’ under article 53 of the RAO. HM Treasury considers that amending this definition would disrupt existing advice services and place a significant burden on firms to ensure that their services align to the new definition. Similarly, the new article 55A will not impact the provision of information or guidance by unauthorised firms, ie, firms providing unregulated guidance services can continue to do so without FCA authorisation.

As targeted support will be a separate regulatory regime from advising on investments, HM Treasury is considering whether the exemptions and exclusions that apply to advising on investments should apply to targeted support. It is also seeking views on any consequential amendments to other legislation or transitional amendments that may be needed to ensure the effective implementation of targeted support.

Pre-defining situations for delivering targeted support

The FCA has described a ‘situation’ as a set of circumstances identified by a firm in relation to its clients involving a common financial support need or objective that the firm reasonably considers can be met with a suggestion.

The FCA is not proposing to prescribe any specific pre-defined situations for offering targeted support, so firms will have to determine these for themselves. Firms should consider the purpose of targeted support when identifying these situations. We would expect there to be some overlap between the types of situations different firms may pre-define and that this may therefore be an area where industry associations could play a role to ensure a degree of consistency.

The FCA has, however, provided a few examples of circumstances where consumer needs or objectives might be met by targeted support, including the following:

• Consumers under-saving for retirement;
• Consumers struggling with an access decision;
• Consumers drawing down their pension unsustainably;
• Consumers in a position to invest;
• Consumers with investment products;
• Consumers who are investing in an expensive fund when a cheaper alternative is available; and
• Consumers choosing between investments and pension products.

Firms can already provide warnings and suggestions in several scenarios within these examples, but targeted support will expand the scope for firms to (for instance) suggest alternative products.

Given that the FCA’s proposals are focussed on suggestions relating to pensions and investments, support relating to other products will not be in scope of targeted support, including for example mortgages and pure protection insurance.

The FCA has also made clear that firms should not be allowed to use targeted support to provide recommendations on giving up defined benefit (safeguarded) pension benefits. Advising on the conversion or transfer of these benefits is governed by article 53E of the RAO.

Pre-defining consumer segments

The FCA has defined a ‘consumer segment’ as a group of individuals (i) in a common situation involving a common financial support need or objective and (ii) where relevant, sharing common characteristics.

In certain circumstances, firms may be able to define a consumer segment by reference only to a situation involving a common financial support need or objective, without needing to consider any common characteristics of those clients. This explains the reference to ‘where relevant’ in the definition above and may, for example, be the case where the firm identifies a situation in which clients are invested in a product that charges high fees where an equivalent lower fees product is also available. The common financial support need in that case would be for the clients to invest in that other product.

Any common characteristics considered should be relevant to the identified common financial support need or objective. Notably, apart from establishing common characteristics that align a consumer with a particular segment (so-called ‘including characteristics’), the FCA also expects firms to consider common characteristics that disqualify a consumer from being part of a segment (‘excluding characteristics’). Such excluding characteristics would be those that likely render a ready-made suggestion ineffective, inappropriate or unduly risky (and thus unsuitable). For instance, a consumer segment for a ready-made suggestion regarding drawdown rates based on average life expectancy would need to exclude consumers with significant health issues affecting their life expectancy.

Given the need for excluding characteristics, there’s a risk that consumers with protected characteristics or certain vulnerabilities may be less likely to benefit from targeted support, with the FCA suggesting that firms may instead need to signpost consumers towards other relevant support services where appropriate. At the same time, the FCA notes separately that it expects firms to consider the needs of vulnerable customers when pre-designing segments and ensure the service meets their needs. There may be some challenges for firms in seeking to balance these requirements.

When pre-defining consumer segments, firms will also need to apply a sufficient level of granularity so that a consumer is only aligned with one segment for each pre-defined situation. However, firms should avoid creating overly individualised segments because this could mislead consumers into thinking that they have received personalised advice. This may be a tricky balance to achieve. With this in mind, firms will need to carefully consider the types of data they use and collect from consumers in order to match them with relevant segments. While firms can use some individualised data (eg, investment objectives or risk tolerance), the FCA is concerned that they may be tempted to make greater use of personal data and consumer interaction in designing targeted support journeys than what is appropriate for this type of service. The FCA considers that limiting the nature of the data firms use and collect is key to ensuring consumers understand the limited nature of the service, which will differentiate it from the existing holistic advice framework and from simplified advice. The FCA is proposing to enable firms to make reasonable assumptions about consumers in a particular segment so that they can factor in certain aspects without needing to gather data in an overly individualised manner.

The FCA will also consider whether to provide illustrations of when consumer segments may be overly broad or individualised, which may be helpful for firms in seeking to find the right balance when defining the segments as this is likely to be an area that will pose some challenges for firms.

Pre-defining ready-made suggestions

It is envisaged that ready-made suggestions will only cover support that would currently be regulated as ‘personal recommendations’ under article 53 of RAO. Targeted support would not capture non-personal recommendations or guidance. The FCA believes this is consistent with HM Treasury’s approach in specifying a new regulated activity for the provision of targeted support in the RAO.

However, in order for firms have confidence in the regulatory perimeter and a proper understanding of the framework that is applicable when delivering different degrees of support, it will be important for this approach to be set out clearly and consistently in clarifications to the advice-guidance boundary.

Verifying consumer segment alignment and assessing suitability

To ensure consumers receive suitable suggestions, the FCA is proposing that firms must have a reasonable basis for determining that ready-made suggestions are suitable for all consumers in the relevant segment.

Under the proposals, a ready-made suggestion would be suitable if it is properly designed and a consumer is correctly aligned, unless there is information the firm ought reasonably to be aware of that would indicate the suggestion would be unsuitable. 

Importantly, the FCA has clarified that targeted support will not be governed by the suitability standards in COBS 9 or 9A, although targeted support would currently technically fall within the definition of ‘personal recommendation’ under article 53 of RAO. The FCA is instead proposing bespoke suitability requirements for the new targeted support service.

When aligning a consumer with a segment, firms will need to verify that the consumer shares the common situation and possesses all of the including characteristics, and none of the excluding characteristics, of that segment. The process may involve a consideration of additional information held about clients beyond that required to align them with a consumer segment. However, the FCA has noted that firms will not be required to consider all the data they hold. Provided that they correctly establish the relevant excluding characteristics, there should not generally be other information that would render a ready-made suggestion unsuitable. Beyond this, firms will need to take reasonable steps to check the information they are using is accurate and up to date.

However, where information beyond what is required to align a consumer with a segment is separately volunteered by consumers during the verification process, this raises another issue for firms in terms of considering the extent to which they should factor any such additional information into their alignment process. Depending on the information provided, this may, for example, result in a determination that the ready-made suggestion is unsuitable and that the consumer should be exited from the targeted support journey. Firms may want to consider whether different delivery channels involve different risks of additional information being provided by clients and whether this may impact their ability to offer targeted support via certain channels.

Limitations relating to annuities, pension consolidation and high risk products

Having considered feedback from its previous consultation, the FCA continues to believe that it would not be appropriate for firms to expressly recommend a particular annuity or quote to consumers under the targeted support framework. Giving a recommendation for a lifelong product that is irreversible would require the collection of significant personalised data, thereby resulting in excessively granular consumer segments.

However, firms could suggest features of an annuity as part of targeted support, without going as far as expressly referring to a particular annuity. Firms can also continue to provide general information and guidance on annuities, which would not amount to targeted support. 

However, where targeted support is provided in relation to annuities (ie, by a firm suggesting features of an annuity), firms will be required to signpost consumers to MoneyHelper’s annuities comparison tool. This would be the end the targeted support journey and enable consumers to generate and compare quotes from across the market themselves.

The FCA explains that this approach would not prevent firms from selling annuities to clients who have previously received targeted support. However, the proposals require a sufficient break in the consumer journey between the provision of a ready-made suggestion and an annuity sale (or the provision of annuity-related communications) in order to encourage consumers to shop around. The FCA does not at this stage specify the length of this break (although it queries whether a two-week minimum would be appropriate) and firms will need to consider whether any risks relating to management of conflicts of interest may arise in these circumstances.

Further, in the case of pension pot consolidation, the FCA is proposing to prevent firms from suggesting consolidation into or out of a particular product given the degree of personalised information needed to make a suggestion.

Moreover, firms will be prevented from suggesting certain high-risk investment products that are subject to marketing or distribution restrictions under the FCA rules due to the inherent risks of such products. This restriction would not apply to suggestions of suitable investments that include a component providing some exposure to one of these excluded products. In addition, the FCA notes that it would not expect products that are leveraged or structured in a way that means the consumer could lose more than they invest to be suitable for ready-made suggestions.

A robust product governance framework

To ensure suggestions are of high quality and meet the needs of recipients, the FCA is proposing to apply existing requirements applicable to the design and distribution of products and services to ready-made suggestions provided through targeted support. These include rules under PROD 3 and 4 requiring firms to have product oversight and governance processes in place and the Consumer Duty, including requirements relating to the manufacture and distribution of products and the provision of fair value to consumers.

Additional rules will require firms to have in place effective processes to monitor outcomes of targeted support, regularly review services, appropriately identify target markets, conduct pre-launch testing and develop effective consumer journeys. This will include ongoing reviews of the firm’s processes for provision of targeted support and information provided by product manufacturers (including product adaptations), identification of any actual or potential harms and consideration of any appropriate mitigation. The FCA’s proposals are aimed at ensuring that any products that form part of a ready-made suggestion remain appropriate for that purpose.  

Firms will need to ensure that they evaluate and update their existing processes, and retain sufficient records of their actions, to enable them to properly evidence compliance with the requirements relating to the design and delivery of targeted support.

Interaction with Consumer Duty and guidance on vulnerable customers

As noted above, the FCA is proposing that firms must design targeted support in a way that delivers ‘better outcomes’ for consumers than if targeted support had not been provided. In this context, better outcomes means putting consumers in a better financial position. The FCA has chosen to use the term ‘better outcomes’ rather than the Consumer Duty term ‘good outcomes’ to avoid any potential misunderstanding that firms would be required to deliver targeted support in order to fulfil their obligations under the Consumer Duty, which will not be the case.

However, where targeted support is provided, the applicable regulatory framework will be underpinned by the Consumer Duty. Importantly, given the framework is designed to support retail customers, firms will be required to treat all recipients of targeted support as retail clients and comply with relevant Consumer Duty obligations when designing and delivering the service. In particular, the FCA is proposing that targeted support should align with the cross-cutting rules under the Consumer Duty to ensure strong consumer protection. Firms will also need to consider other applicable obligations under the Consumer Duty, including those relating to product governance, fair value and customer understanding.

Firms providing targeted support will also be responsible for monitoring the outcomes that consumers receive pursuant to the Consumer Duty. This will include identifying whether any group of retail customers is experiencing different outcomes compared to another group of customers receiving the same targeted support and whether any groups of customers have suffered harm as a result of the firm’s acts or omissions.

The FCA also expects firms to consider its existing guidance on the fair treatment of vulnerable customers (FG21/1) and their obligations under the Equality Act 2010 when providing targeted support. When pre-defining customer segments, this means that firms should understand the needs of vulnerable customers and ensure the service meets their needs (although, as noted above, this may in some cases raise concerns relating to the interaction with defining excluding characteristics).

Targeted support communications

Whilst the FCA notes the importance of firms’ communications with clients, it does not intend to prescribe specific touchpoints, language or methods of communication during the targeted support journey. However, the overarching standards under the Consumer Duty will apply to require firms to:

• support consumers’ understanding by ensuring communications meet clients’ information needs, are likely to be understood and enable clients to make effective, timely and properly informed decisions (PRIN 2A.5.3R); and
• tailor communications, taking into account factors such as the characteristics of the client, including any vulnerability, the complexity of products and the communication channel (PRIN 2A.5.8R).

In addition, the FCA is proposing to introduce the following specific requirements for firms to communicate to consumers:

• the nature of targeted support, including that it is based on limited information and does not constitute individualised advice;
• the common characteristics of the consumer segment to which a consumer has been allocated (and firms should also consider whether it would be appropriate to disclose any assumptions);
• that the ready-made suggestion was designed for the relevant consumer segment; and
• any limitations on the scope of products considered by the firm (eg, whether the firm has only considered its own products or those of connected firms).

Where appropriate, firms will also be required to consider signposting consumers to other sources of support. Moreover, they should test their targeted support communications, take reasonable steps to ensure consumer understanding, use durable medium to provide required information and enable clients with an option to opt-out of receiving ready-made suggestions. Firms will also need to continue to comply with other existing product- or service-specific rules, including with respect to prescriptive pension disclosure requirements.

Separately, the FCA has noted respondents’ concerns from its previous consultation that the existing ‘direct marketing’ framework is likely to hinder firms in providing targeted support on a proactive basis. Where direct marketing uses personal information, it is covered by the UK data protection regime under the Data Protection Act 2018 and the UK General Data Protection Regulation. Where direct marketing is carried out using electronic marketing messages (eg, phone calls, emails or text messages), it is also covered by the Privacy and Electronic Communications Regulations 2003 (PECR). The FCA is therefore working with the Information Commissioner’s Office (ICO) and the government to address these issues, which have not been resolved prior to the FCA’s consultation and may constitute a barrier to firms being able to offer proactive targeted support broadly to the consumers that may benefit from it. In its Policy Note, HM Treasury has separately noted that it is exploring a range of options, which could include further guidance from the ICO and the FCA or legislative changes to enable automatically enrolled pension providers to operate a ‘soft opt-in’ exception to electronic mail consent requirements under PECR. Any changes will need to ensure the protection of consumers’ preferences and data protection rights, as well as the effective operation of automatic enrolment systems.

Costs and charges

The FCA expects firms to offer targeted support free of charge in most cases, but has maintained its proposal to allow firms to charge for the service if they wish to do so. In line with the approach for investment advice, firms will not be permitted to solicit or accept commissions or other benefits (except acceptable minor non-monetary benefits) in connection with their targeted support or related services.

Despite some concerns being raised that cross-subsidisation may undermine transparency and encourage firms to suggest their own products, the FCA’s proposals will allow firms to use cross-subsidisation or multi-product pricing strategies to recover the costs of offering targeted support. This may enable firms to offer the service in a commercially viable manner without charging for it, which is likely to make the service more broadly accessible to consumers. However, where firms are only considering their own products, they will also need to consider whether this raises any challenges with respect to managing conflicts of interest and provide appropriate communications in line with the requirements noted above. Existing conflict of interest requirements under the Senior Management Arrangements, Systems and Controls Sourcebook (SYSC) are expected to apply without amendment.

Firms must disclose to consumers how they will be compensated for delivering targeted support (and agree any charges) and ensure consumers get fair value from the service pursuant to the Consumer Duty.

Regulatory framework and other requirements

As noted above, the targeted support framework proposed by the FCA builds on existing requirements and is underpinned by the Consumer Duty and existing product governance rules. The FCA has proposed new outcomes-focused conduct standards to give firms flexibility to tailor their targeted support offerings. In addition, a number of other requirements under the FCA Handbook will apply to targeted support in largely unamended form, including requirements under SYSC, the Senior Managers and Certification Regime (SM&CR) and the conduct standards under the Code of Conduct (COCON).

In addition to the requirements detailed elsewhere in this briefing, we have summarised below certain key points related to the application of the regulatory framework and regulatory requirements to the new targeted support service.

Approach to authorisations

As noted above, the provision of targeted support will be introduced as a new regulated activity under the RAO. The practical implication is that all existing authorised firms that wish to provide targeted support will need to seek a new permission by submitting a Variation of Permission Application to the FCA or the PRA (for dual regulated firms), as appropriate.

In preparing their applications, firms should note the FCA’s position that it will pay attention to matters such as how the firm plans to identify customers who might benefit from targeted support; plans for consumer segmentation; proposed development of ready-made suggestions; verification processes for aligning consumers with particular segments; evidence of clear customer journeys for targeted support; appropriate testing and plans for ongoing checks; and systems and controls for delivering targeted support effectively and in compliance with relevant rules.

Appointed representatives

The FCA is of the view that delivering targeted support in an adequate manner would require certain specific capabilities, which many appointed representatives would not have. Ultimately, HM Treasury will need to consider whether appointed representatives should be permitted to provide targeted support, as this would require a change to the list of permitted activities appointed representatives can carry out. HM Treasury has, as part of its Policy Note, asked stakeholders to provide feedback on whether they consider that appointed representatives should be able to provide targeted support. This may mean that, at least initially, targeted support can only be undertaken by directly authorised firms.

Interaction with COBS requirements

The new conduct framework relating to targeted support will be included in a separate chapter of COBS (COBS 9B).

Broadly speaking, targeted support would also be subject to the existing COBS requirements where relevant. However, there are some exceptions proposed in the consultation paper. For instance, the FCA is proposing to disapply the requirements on client categorisation set out in COBS 3, as firms will be required to treat all recipients of targeted support as retail clients. The proposed rules on targeted support do therefore not differentiate between different categories of clients.

In addition, suitability requirements under COBS9/9A and appropriateness requirements under COBS 10/10A will also be disapplied given the FCA is proposing bespoke suitability requirements for targeted support. As noted above, the FCA is also proposing a restriction on firms soliciting or accepting monetary or non-monetary benefits in connection with targeted support services (similar to that in COBS 6.1A), which will be included on stand-alone basis for targeted support in COBS 9B.

The FCA is also considering how COBS 19 rules around supporting consumers in the run-up to or at the point of accessing their pension will interact with targeted support.

Senior Managers and Certification Regime

The FCA is proposing that a firm granted permission to provide targeted support would be categorised as a ‘core SM&CR firm’ unless it is already an ‘enhanced scope SM&CR firm’ or is also applying for authorisation to conduct other activities that fall under the enhanced scope criteria. Dual regulated firms will remain in their existing category if they are seeking permission to provide targeted support.

The Senior Managers Regime, including the fitness and propriety criteria in the Fit and Proper Test for Employees and Senior Personnel Sourcebook are expected to apply to targeted support. The FCA is not proposing that individuals providing targeted support would be certification employees in relation to the targeted support activity. The conduct standards in COCON would support the FCA’s conduct expectations for individuals involved in providing targeted support and for senior managers overseeing the support.

Prudential requirements

To ensure firms are reasonably established and capable of managing potential risks when delivering targeted support, the FCA is proposing to set an absolute minimum requirement of £500,000 for firms solely authorised to provide targeted support. Other firms will generally continue to be governed by the prudential regimes they are already subject to, but with a minimum baseline requirement of £500,000. The FCA considers that these requirements are necessary given the nature of targeted support, including that it is designed for groups of consumers, can be instigated at a firms’ discretion and used to deliver a recommendation. The FCA is evaluating whether, in addition, a bespoke scalar should be implemented for firms offering targeted support to align their financial resources requirements with the specific level of risk associated with growing targeted support activities.

Complaints and redress

The FCA has proposed that consumers should be able to refer complaints against firms providing targeted support to the Financial Ombudsman Service (FOS) and that consumers complaints should be handled according to the rules and guidance set out in the FCA’s Dispute Resolution sourcebook (DISP). The FCA does not intend to propose any changes to the current DISP rules. As such, firms providing targeted support will need to comply with the same complaints handling rules applicable to other regulated forms of investment advice.

However, to address significant concerns raised by firms around clarity on liability and risks of inconsistent interpretations, the FCA and the FOS have committed to working together to publish specific case studies or guidance on how cases about targeted support will be considered. Firms will not be expected to have conducted the same fact-finding or suitability process as required when giving personal recommendations under COBS 9 or 9A. However, where firms have gone beyond the scope of offering targeted support, the FOS may consider applying the broader regulations applicable to advice to assess complaints.

The FCA is also proposing to extend the right to make Financial Services Compensation Scheme (FSCS) claims to targeted support. As a result, consumers with valid civil claims against defaulting firms arising from targeted support services will be able to bring such claims to the FSCS.

The way forward

The deadline for feedback on the FCA’s proposals for targeted support is 29 August 2025. The FCA is aiming to publish a policy statement with final rules by end of 2025 and the new authorisation gateway is expected to open in March 2026.  

HM Treasury also welcomes comments on its draft statutory instrument by 29 August 2025. Subject to any feedback received, it intends to legislate later this year when Parliamentary time allows.

In light of the timeline above, firms should start considering how they may embrace the changes and opportunities brought about by the new regime, as well as examining the detailed rules and practical implications of the proposals for their business and their clients. The FCA is keen for firms to be able to operationalise targeted support quickly, so it will be important to assess the extent to which the proposals pose any particular challenges or concerns that it would be helpful to raise with the FCA or HM Treasury at this stage as part of the consultation process.