Britain’s Financial Conduct Authority (FCA) has proposed giving workplace pension providers greater flexibility to allocate capital into private markets by excluding certain performance-linked fees from the regulatory charge cap on default pension funds.
📌 Key Regulatory Proposals & Safeguards:
• Performance-Fee Exclusion: Removing performance-linked fees from default fund fee caps removes a major structural barrier that previously deterred defined-contribution schemes from accessing illiquid alternatives.
• Broader Alternative Access: The reform aims to expand institutional pension flows into private equity, venture capital, and private credit.
• Strict Value-for-Money Guardrails: The FCA emphasized that any higher fees incurred through private market allocations must be strictly justified by superior net value delivered to retirement savers, backed by enhanced rules on transparency, fee allocation, and private asset valuation.
📌 Consultation & Implementation Timeline:
• Public Feedback: Industry consultation remains open until January 14, 2027.
• Final Rulebook: The regulator expects to publish finalized rules in summer 2027.
💡 Market Takeaway: UK defined-contribution pension funds have historically lagged global peers in private asset allocation due to rigid fee caps. By aligning performance incentives with strict valuation governance, the FCA is paving the way for long-term retirement capital to flow into domestic growth equity, infrastructure, and private credit.