Regulators have stepped in to clarify pensions marketing communication after confusion caused by the new Consumer Duty rules and how they affect existing regulations.
The update follows the introduction of the Consumer Duty and its rules on client communication.
The Duty requires regulated firms to communicate regularly with clients to keep them updated.
Three key bodies, the FCA, ICO (Information Commissioner's Office) and TPR (The Pensions Regulator), have issued a rate joint statement for retail investment firms and pension providers to "clarify" the rules.
The statement makes clear that pensions providers can provide regulatory updates to clients as long as the material is not direct marketing, unless clients have opted in to receive direct marketing.
Regulatory communication, however, includes a wide range of information that can be sent to clients.
This can include a message that warns a customer that they are at risk of harm from having an inadequate pension income in retirement or from drawing down on their pension at an unsustainable rate. It can also include reminding customers of the option of consolidating their pension pots.
Other topics which can be covered include decumulation options, where people can access free tools, such as pension tracing tools and savings or retirement income calculators and informing a customer they are being transferred to another pension scheme.
The statement covers data protection and “effective communications” to consumers in relation to retail investments and pensions.
The statement says: “Retail customers and pension scheme members should receive the information they need, at the right time, and in a way they can understand, while respecting their direct marketing preferences. This is crucial for creating an environment where customers can trust the information they receive, helping them to make informed decisions and pursue their financial goals."
The three bodies say they have heard from retail investment firms and pension providers that they would benefit from further “regulatory clarity” about how The Pension Regulator’s (TPR) Code of Practice and guidance on communications requirements and the Financial Conduct Authority’s (FCA) Consumer Duty interact with direct marketing rules under data protection law and regulations.
The statement aims to provide greater clarity for firms and pension scheme trustees or managers to support their customers’ decision-making in line with the FCA Consumer Duty and TPR’s Code of Practice and Guidance.
The statement makes clear that firms can provide “regulatory communication messages” to retail customers and pension scheme members.
These communications should provide “neutral, factual information” that supports them to make informed decisions about retail investments and pensions options, including at retirement.
The statement makes clear that UK data protection laws, including the UK GDPR, the Data Protection Act 2018 and the Privacy and Electronic Communications Regulations 2003 (PECR), do not prevent firms from sending these regulatory communications. However, firms must ensure that they comply with data protection requirements.
Direct marketing or sales messages cannot be sent to retail clients unless they have opted in to receive them or are able to receive these messages under existing direct marketing rules. Direct marketing covers “advertising or marketing material which is directed to particular individuals”.
UK data protection laws enable direct marketing to be done responsibly but it must comply with data protection principles (such as fairness, lawfulness and transparency) and firms must provide people with a right to object to and ‘opt-out’ of direct marketing. Electronic mail marketing (eg emails, text messages, direct messages on social media) cannot be sent to individuals unless they have specifically consented to receiving electronic mail marketing or are an existing customer and they were given a simple way to ‘opt out’ of direct marketing.
The ICO’s guidance on direct marketing and regulatory communications helps firms determine if regulatory communication messages are likely to count as direct marketing.
The FCA’s Consumer Duty includes rules and guidance relating to how firms communicate with their customers. Under the Duty, firms’ communications are required to equip their retail customers to make “effective, timely and properly informed decisions.” PRIN 2A.5.5R requires firms to communicate before the purchase of a product and at suitable points throughout its lifecycle.