FCA multi-firm review finds legacy unit-linked pension customers receiving poorer value, sets out benchmarks for life insurers
The FCA has published findings from a review of Consumer Duty price and value practices at life insurers. Legacy product customers are receiving poorer value, and the FCA has warned it will take supervisory or regulatory action where firms do not improve.
Action required for life insurers offering unit-linked non-workplace pensions and savings. If your firm has acquired or transferred a closed book, this review applies to you directly.
The FCA has published findings from a multi-firm review of Consumer Duty price and value practices covering unit-linked non-workplace pensions and savings, a market comprising around 17 million policies and £500 billion of assets. The review sampled life insurers covering around 90% of total policies in the market.
Customers in older products are more likely to receive poorer value than those in newer ones. Around half of the policies in the sample were in legacy or closed products that do not allow new sales. Those customers often receive poorer investment returns, in some cases because of higher aggregate fees including product fees, fund fees, and commission. They may also have access to fewer service features, such as online account management.
Where firms are falling short
Under the Consumer Duty price and value outcome, firms must carry out fair value assessments to determine whether the price a customer pays is reasonable relative to the benefits they can reasonably expect to receive. The FCA identified three recurring weaknesses in how firms approached this.
First, legacy products often carry complex charging structures with multiple fixed and percentage components, making it difficult for firms to monitor total charges and identify where products are not delivering fair value. Second, firms relied on broad cohort-level assessments that masked significant variation in value outcomes within those cohorts. Third, firms did not always have a clear understanding of the nature and value of all legacy policy benefits, partly because of poorer data quality from legacy systems.
Good practice identified
The FCA did find examples of firms making material reductions to charges for a significant number of legacy customers, simplifying charging structures, and in some cases introducing caps on annual management charges, bringing overall charges more in line with comparable open products.
What the FCA expects next
The FCA has stated that where it does not see timely progress or evidence of fair value, it will take supervisory or regulatory action. The FCA has also confirmed that Consumer Duty applies to transferred business, including closed books, and firms involved in a transfer or acquisition must ensure the business complies with the Duty.
One structural constraint acknowledged in the review concerns legislation known as contractual override, which allows pension providers to amend scheme terms without individual member consent. Under the Pension Schemes Act 2026, these provisions apply to workplace pensions only. Firms have told the FCA they would support extending this to non-workplace pensions.
Workplace pensions, reviewable whole-of-life policies, unit-linked annuities, and with-profits policies were all excluded from the review's scope.
Firms reviewing their Consumer Duty frameworks in response to this review should also note that a separate FCA consultation, CP26/23, proposes changes to how firms in distribution chains can rely on each other for Duty compliance. Responses close 18 September 2026.
