The Financial Conduct Authority has launched a Cost of Living online hub to give workplace pension providers, advisers and other regulated firms guidance on helping clients hit by the cost of living crisis.

Our latest insight article looks at what guidance the regulator is offering to workplace pension providers and advisers when it comes to dealing with clients struggling to make ends meet.

At the end of July the Financial Conduct Authority (FCA) launched a hub within its website to give the firms updated guidance on dealing with clients who have been hit by the cost of living crisis.

With CPI inflation above 9% and rising, with fears from economists that it could reach as high as 14%, the FCA has launched the hub due to fears that consumers may need to cut back in other areas, such as pension contributions, or be desperately seeking help to access their savings early.

A Dear CEO letter from Sheldon Mills, Executive Director at the FCA, recently reminded providers of their duty when it comes to treating customers in vulnerable circumstances fairly.

Mr Mills said: “If consumers face increasing difficulty paying bills or repaying debts, the impact on them is unlikely to be purely financial. Consumers will be more likely to face pressures on their physical and mental health, which in turn could exacerbate the impact of their financial difficulties.

“Over half of the population (55%) feel that their health has been negatively affected by the rising cost of living (YouGov/Royal College of Physicians), and those with low mental capacity, or who may struggle to access support, will be least able to respond to these challenges.

“Firms’ frontline services will have to deal with more customers presenting with a complex range of vulnerable circumstances and non-financial knock-on effects of the rising cost of living.”

In July the regulator also expressed concerns that people struggling with rising prices could turn to unreliable sources or agencies for help.

Research from the regulator in June found over half (52%) of consumers facing financial difficulties waited more than a month before seeking help.

It also revealed that 42% of borrowers who were struggling financially and ignored lenders’ attempts to contact them did so because they felt ashamed.

Two in five surveyed who were struggling financially incorrectly thought that even talking to a debt adviser would have a negative impact on their credit file.

With the Bank of England’s base rite rising to 1.75% in August, the biggest rise in 27 years, many mortgage-holders and those with high levels of debt could soon reach crisis point with their finances.

Whilst the support materials are primarily designed for financial services providers, the FCA hub also includes support resources for consumers struggling with borrowing and debt.

The materials encourage consumers to reach out to their financial services providers and the Government’s MoneyHelper service if they have concerns about money.

Other concerns shared by the FCA within its new hub include a Dear CEO letter asking providers to take action to ensure financial promotions are clear, fair and not misleading.

The regulator said it intends to keep providers “under close review” to ensure that firms focus on their customers’ needs, delivering the “right information, at the right time”.

It also reminded providers that the rules on financial promotions apply to all mediums, including websites, paid for Google ads and social media sites such as TikTok and Instagram, and that any form of communication is capable of being a financial promotion if there is any kind of invitation or inducement to engage in financial activity.

The letter added: “We expect firms to be putting their customers’ interests at the heart of their business, and this includes when they draft, publish and review financial promotions. It is especially important that firms consider the potential harm for consumers should they be mis-sold products via misleading, unfair or unclear promotions.”

FCA data shows that around 27% of the population has low financial resilience and this is likely to increase over the coming months.

The new cost of living hub from the regulator can be used as a resource to help the increasing number of workplace pension members displaying characteristics of vulnerability as these pressures are felt.

By making sure they are supporting their members to the best of their ability, not only can workplace pension providers ensure they are remaining compliant with the regulator, but they can also build strong relationships with scheme members who may be more likely to turn to them for support and guidance in the future.