Targeted support: FCA near final rules, HMT response and joint statements

The FCA has published near‑final rules for its new targeted support regime (PS25/22), alongside a joint FCA/FOS statement on complaint handling and an HMT consultation response confirming the legislative approach and next steps. These follow on from an FCA consultation earlier in the year (see our previous client note here).

Together, these publications seek to clarify scope, standards and timing for the new framework and address several operational pinch‑points raised by firms, including annuities, charging, communications, monitoring, PECR constraints and redress.

The regime is expected to go live in April 2026, with the gateway for permissions opening in March 2026.

What is targeted support?

Targeted support enables authorised firms to give one‑off, group‑based recommendations (“ready‑made suggestions”) to clients in defined “situations,” aligned to pre‑defined “consumer segments” with shared needs and, where relevant, common characteristics. It is intended to bridge the advice gap between generic guidance and full personalised advice, without requiring a comprehensive, individual assessment. Firms must design segments and suggestions ex‑ante and deliver them at scale within an outcomes‑focused framework under the Consumer Duty. Clients must be treated as retail clients for this service.

Targeted support is regulated as a new specified activity, and it is distinct from fully personalised investment advice. Suitability is assessed at segment level at the point of specifying a ready‑made suggestion, not through ongoing individual suitability assessments. Firms must not proceed where they know or ought reasonably to know that the suggestion may be unsuitable for the individual (for example, due to volunteered information).

Key updates to FCA rules

The fundamental design of the regime remains the same as in the FCA’s earlier consultation, but they have made a number of updates in their final rules:

• Purpose: The FCA has refined the purpose statement to “put consumers in a better position” (to avoid confusion with Consumer Duty “good outcomes”). Firms should only provide targeted support where there are reasonable grounds to expect it will put the intended group in a better position than if no support were given.
• Segments and granularity: Segments must be “sufficiently granular,” but firms are now expressly prohibited from using a level of detail that would reasonably be associated with comprehensive, individualised advice. Firms may use non‑material assumptions but cannot rely on assumptions that are material to suitability.
• Product limits: The FCA has maintained limits on high‑risk or inherently personalised products and retains prohibitions on using targeted support to recommend consolidation into or out of a particular pension product. But it has clarified that suggestions can still include investments whose component parts have incidental exposure to excluded assets (e.g., diversified funds).
• Annuities: The FCA has adjusted its position to allow firms to direct consumers to whole‑of‑market annuity brokerages, while still prohibiting recommendations of a particular annuity within targeted support. The previously proposed “break” between targeted support and the annuity sales journey is not being taken forward. Instead, a “soft break” is created by requiring signposting to MoneyHelper’s comparison tool first. Fixed‑term annuities with a surrender option are carved out of the annuity‑specific rules.
• Delivery and data: The FCA has sought to clarify and bolster the rules providing that firms can initiate targeted support where they have reasonable grounds to consider a client is in a pre‑defined situation (as well as at the request of a client). The FCA has maintained their position that firms can use existing or new data but must take reasonable steps to ensure accuracy and may verify data with the consumer. They must also prevent consumers from receiving targeted support if data or “volunteered information” indicates the suggestion may be unsuitable.
• Disclosure: The FCA has updated its rules so that when issuing a ready‑made suggestion, firms must explicitly label the service as “Targeted Support”, as well as explaining the segment (including/excluding characteristics), and disclosing any product‑scope limitations (e.g., in‑house range).
• Monitoring and reviews: The FCA has streamlined its proposals around monitoring to avoid converting targeted support into an ongoing service. Firms should review services regularly, assess whether suggestions remain suitable at segment level, and consider significant product adaptations, but retrospective look‑backs to identify past takers after a product change have been removed. Firms are not required to track product market performance for suitability purposes.
• Charging, inducements and cross-subsidies: As in the consultation version of the rules, firms may offer targeted support for free or charge for it, but must ensure fair value. Commissions and other benefits are generally prohibited in relation to targeted support, with limited exceptions (e.g., minor non-monetary benefits, payments from affiliated companies that are reasonably representative of cost). The FCA has, however, narrowed cross subsidy disclosures, removing proposed consumer disclosures of cross subsidy arrangements but maintaining transparency obligations under existing inducements rules where relevant.

Direct marketing and consumer engagement

Many firms highlighted the Privacy and Electronic Communications Regulations (PECR) as a barrier to proactive targeted support, especially for workplace pensions. As a result of this, HMT will legislate to enable workplace pension providers to deliver targeted support communications to members who have not opted‑out of direct marketing. The FCA and ICO have also issued a joint statement clarifying how to communicate within existing rules. The FCA acknowledges this should materially increase the number of savers that providers can reach, supporting regime adoption.

Complaints and FOS approach

Another key concern raised by firms was the risk of redress in relation to targeted support arising from customer complaints. The FCA and FOS have issued a joint statement confirming that targeted support complaints will be handled within DISP, and the FOS will consider what is fair and reasonable, taking account of FCA rules, recognising that targeted support is a one‑off, point‑in‑time segment‑level assessment. Wider‑implications cases may be referred by the FOS to the FCA for interpretive clarity under their recently updated MoU.

Authorisation and timing

HMT has confirmed the legislative intent that targeted support will be a new specified activity in the RAO, with rollout from early April 2026 and the FCA gateway for permissions opening in March 2026. As expected, Appointed Representatives will not be able to deliver targeted support at launch. The FCA is operating a Pre‑Application Support Service (PASS) to help de‑risk applications and intends a post‑implementation review within two years.

Practical implications and next steps for firms

Targeted support may be an attractive service option for many firms, whether that be FinTechs pioneering more automated, data-driven customer journeys, or more traditional firms seeking a way to support a wider base of retail customers. However, the FCA has set high standards in terms of the use of data and customer segmentation, and the risk remains of getting advice wrong at scale.

To mitigate this, firms considering targeted support should begin detailed design and governance planning now. In practice, this means:

• rigorously defining the “situations” to address;
• constructing consumer segments with clear including/excluding characteristics and documented rationales;
• specifying ready‑made suggestions and associated assumptions;
• testing communications and consumer understanding;
• ensuring appropriate use of data, verifying accuracy, and ensuring volunteered information is handled appropriately;
• building review and monitoring processes, particularly around significant product adaptations; and
• assessing the overlaps with the Consumer Duty, product governance and other existing compliance processes.

Firms wishing to pioneer the new service, should prepare for the FCA gateway opening in March 2026.