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The FCA’s ‘polluters pay’ proposals could have significant implications for firms, particularly those who have provided advice on defined benefit pension transfers.

Quantifying and holding capital for potential redress liabilities will become a requirement under the proposals set out in CP23/24.

The proposals put forward by the FCA in their consultation paper will require firms to quantify their potential redress liabilities and set aside capital to meet these potential obligations. Firms unable to demonstrate the capital adequacy would be subject to asset retention restrictions.

Whilst firms should already understand where they are potentially exposed to future redress claims, putting a value on this exposure could be a challenging and time consuming task which will require external expert support.

Firms should be watching the outcome of the consultation carefully, considering the steps they can take now and the support they might need in the future. The consultation closed on 20 March 2024. The FCA intends to publish a Policy Statement in H2 2024 with rules coming into force in H1 2025.

How can you prepare? What is the FCA seeking to achieve? What are the proposals? How can you quantify potential redress liabilities?

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