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FCA’s costs related to Brexit jump £2.5 million from previous year

The U.K.'s Financial Conduct Authority spent 2.5 million ($3.3 million) more on costs associated with the U.K. withdrawal from the European Union compared to the previous fiscal year, the financial services watchdog said in its annual report Thursday.

In the report, the FCA listed its top priorities for the coming year, which include governance, long-term savings, financial crime, cybersecurity, innovation and market competition. The British withdrawal from the EU, or Brexit, remains on the agenda.

The FCA said in the report that the U.K. government committed to legislating for a "temporary permission regime," which will enable European firms to operate seamlessly the day after Britain's exit from the EU.

"But it cannot currently provide the same assurance for customers in the (European Economic Area) who use the services of U.K. firms, and we will continue to work with the EU to achieve this," the FCA said.

Building on Department for Work and Pensions' research, the FCA also said it will monitor average fees for occupational defined contribution plans, estimated by DWP at 0.54% of assets under management for contract-based DC plans, 0.48% for multiemployer DC plans known as master trusts and 0.42% for trust-based DC plans.

"We will monitor these figures to identify trends over time, for example to identify whether competition is driving better value for consumers, and whether we should investigate differences between different parts of the market further."

In addition, the FCA said it had analyzed whether firms were adequately reviewing their approach to lifestyle, or life-cycle, strategies following the pension freedom legislation in 2015.

"Our work ... highlighted a few firms who were not. We asked these firms to carry out a further assessment of their approach and communicate with their customers to explain how their lifestyle strategy reflects their retirement options," the report said. "These firms have now done this. Customers' behavior about their pension choices continues to evolve and so we expect firms to keep this issue under active review."

Regarding the money management industry and building on a major study the FCA conducted earlier in the year, the Asset Management Market Study, the FCA reiterated in the current report that it found weak price competition in regard to fees. "We also found that investors are not always clear what the objectives of funds are and fund performance is not always reported against an appropriate benchmark. This makes it hard for investors to realistically assess performance."

The FCA said in the report: "We have finalized new rules that strengthen the duty on fund managers to act in the best interest of their investors, requiring them to assess the value they provide to their customers on a regular basis. For the first time in the U.K., we are also requiring the boards of fund managers to have independent members. We chaired a working group of industry and investor representatives to consider how to make the objectives of funds clearer and more useful to investors. As a result, we have issued new draft rules for consultation. And where firms are dealing with large, institutional investors — like those managing pensions — we have supported an independent group of investor and industry representatives to work on better, more consistent disclosure of the costs and charges investors are paying."

"We think that, taken together, these measures will have a big impact and help competition to work better in the interests of the millions of people investing through this market," the FCA added.