FCA Consultation Paper CP26/20 – New Rules for Self-Invested Personal Pensions (SIPPs)

Overview

On 22 June 2026, the FCA published Consultation Paper CP26/20, “Adapting our rules for a changing market: self-invested personal pensions”. The paper proposes new FCA Handbook rules for firms operating self-invested personal pensions (SIPPs), covering two principal areas: due diligence requirements and a new Pension Scheme Money and Assets (PSM&A) regime. The focus of the due diligence rules is SIPP products offering members choice and flexibility in the investments. The PSM&A rules focus on firms using an unauthorised trustee company as part of their structure.

From a policy perspective, the proposals reflect a decisive shift in the FCA’s expectations of SIPP operators, from facilitating access to investments towards actively controlling and monitoring the risks those investments present. While this is likely to reduce instances of consumer harm and aligns with the FCA’s broader focus on accountability and firms’ Consumer Duty obligations, it also introduces tension with the traditional SIPP model of investor choice and may result in a reduction of customer options, for example if operators feel they need to be more cautious in supporting any more esoteric funds (particularly private credit) in their products. This would be potentially at odds with the Government’s push for greater diversification in pension savings. Ultimately the proposals may also accelerate consolidation in the market. Overall, the proposals represent a significant strengthening of the SIPP regulatory framework and are directionally positive from a consumer protection and market integrity perspective. However, they come with material operational cost, a likely reshaping of the SIPP ecosystem, and a shift in the role, and risk profile, of SIPP operators that firms will need to consider carefully.

From a practical perspective, complying with the new rules will involve significant operational systems builds and changes to internal governance arrangements for many SIPP operator firms, but more broadly all types of firms involved in SIPP distribution chains will be impacted by these proposals. Both the new due diligence requirements and PSM&A will require minimum standards for SIPP operators across their contractual arrangements with third parties including IFAs and DIMs, and third party platforms and custodians, ensuring they have access to the information they need and can exercise the level of oversight required by the new rules and are able to evidence this. Firms’ existing contractual arrangements such as platform and custody agreements and IFA/DIM terms of business will all need to be reviewed for compliance with the new rules, once finalised.

The consultation closes on 24 August 2026, with a policy statement and final Handbook text targeted for H1 2027. In addition, the FCA proposes a 1 year implementation period for the new due diligence rules, and a minimum 2 year implementation period for the PSM&A, with some firms able to extend this to 3 years if they have identified significant dependencies on third parties that prevent full compliance and develop plans to address them.

Key Proposals

1. Due Diligence Requirements

The FCA proposes specific due diligence rules for SIPP operators, rather than relying on expectations that currently exist only under high-level principles and non-Handbook guidance (FG 13/8) which the FCA recognises has led to differing interpretations and uncertainty about the extent and scope of these regulatory expectations. The principal aim is to ensure investments made in a consumer’s SIPP are genuine and involve a credible investment proposition, reducing the risk of exposure to scams, fraud, or implausible investments. The new rules also aim to provide firms with clarity and predictability as to the FCA expectations thereby improving consistency and strengthening standards of due diligence across the sector.

The proposed scope is limited to personal pension schemes whose primary purpose is to give consumers flexibility and choice over the underlying investments on an ongoing basis. Schemes offering only a limited range of pre-selected investments are excluded. 

In seeking to be proportionate to the risks, the rules adopt a tiered approach:

• Core due diligence (all assets): Firms must ensure investments are not taxable property for HMRC purposes, be satisfied there is proper custody and good title, and confirm they can administer the asset effectively. 
   
• Additional due diligence (higher-risk assets): Further steps will be required for all assets with fewer existing protections under applicable regulatory regimes, focusing on the risks relevant to consumer harm and scam prevention. 
   
• Due diligence on relevant third parties: Due diligence and monitoring requirements will apply to introducers and other third parties including IFAs and DIMs. Proposals include KYC-type identity verification, requirements for the terms of SIPP-operator firms’ contractual arrangements with third parties, and periodic monitoring of scheme assets managed by third parties.

The FCA also proposes governance, monitoring and record-keeping obligations related to due diligence processes.

Implementation period: 12 months from the date the FCA publishes its final rules. After this period, the rules apply to new assets added, further investment in existing assets, and new third-party arrangements. Existing arrangements with third parties must be reviewed and brought into compliance during the implementation period. The rules will not apply retrospectively to investments made before the end of the implementation period. 

2. Pension Scheme Money and Assets (PSM&A) Regime

The FCA proposes introducing a new PSM&A regime, addressing gaps where firms are not subject to the Client Assets Sourcebook (CASS). The regime targets arrangements using unauthorised trustee companies, a common structure in the SIPP market. 

Key elements of the PSM&A regime include:

• Internal records of pension scheme money: Firms must establish and maintain an internal record of pension scheme money, including money held indirectly by third parties. 
• Regular reconciliations: Firms must perform frequent reconciliations to ensure records are complete and accurate, identifying and investigating discrepancies promptly.
• Asset holdings records and transactions data: Firms must record and maintain data on investment holdings and transactions, including those made through third parties. 
• Valuations: Firms must include a recent valuation within their asset holdings record, ensuring recorded valuations are reasonable, credible and sufficiently up to date.
• Annual audit: Firms must commission an annual audit for internal assurance purposes, with a resulting Scheme report addressed to the firm’s governing body. 
• Third-party information flows: Firms must have contractual arrangements with third parties specifying information flows to support books and records and reconciliation requirements. 
• Senior management oversight: A director or senior manager must have operational oversight of the PSM&A regime. 
• The PSM&A regime does not apply to money or assets already subject to CASS, ensuring firms are not subject to overlapping requirements. SIPP operator firms are intended to be responsible for compliance with the PSM&A regime requirements where they require action by unauthorised trustee firms controlled by the SIPP operator.

Proposed implementation period: Two years, with an additional year available for SIPP operators with existing third-party relationships where the firm has identified dependencies on third-party data and developed a plan to address them. 

In light of the proposed due diligence and PSM&A rules, the FCA proposes to retire the 2013 non-Handbook guidance (FG 13/08). 

Practical Implications for Firms

• Operational readiness: Firms not currently subject to CASS should begin assessing what systems, controls and record-keeping infrastructure will be needed to comply with the PSM&A regime. The FCA recognises compliance costs may prompt some firms to leave the market but considers the requirements set a minimum standard all firms operating a personal pension scheme should be able to meet.
• Third-party relationships: SIPP operators will need to review contractual arrangements with discretionary investment managers, custodians and other third parties to ensure adequate information flows at the required frequency. Where third parties cannot meet these requirements, the FCA expects that firms may need to off-board relationships.
• Due diligence systems: Firms should assess current due diligence processes against the proposed tiered framework and identify gaps, particularly in relation to higher-risk assets and third-party monitoring obligations. 
• Market consolidation: The FCA acknowledges that compliance costs could create affordability pressures for smaller SIPP operators and discretionary investment managers with a small presence in the SIPP market, potentially driving further market consolidation.

Next Steps

Firms should review the consultation paper and the draft Handbook text in the Consultation Paper, and consider submitting feedback by 24 August 2026. Subject to consultation responses, the FCA aims to publish a policy statement and final rules in H1 2027. Firms in scope should use the consultation period to begin gap analyses and planning for implementation.