The FCA has proposed reforms to simplify remuneration rules for solo-regulated firms and more proportionate frameworks for AIFMs, UCITS management companies and MIFIDPRU investment firms. The FCA has published a consultation paper which sets out proposed changes to the remuneration framework for solo-regulated firms. These reforms aim to introduce a simpler, more consistent and proportionate framework for AIFMs, UCITS management companies and MIFIDPRU investment firms.
The consultation is open until 16th September 2026.
The FCA proposes replacing the existing remuneration frameworks for AIFMs, UCITS firms and MIFIDPRU firms with a consolidated remuneration framework for solo-regulated firms. The new framework is intended to provide a consistent and proportionate approach for those firms in scope, which will reflect the firm’s size and activities. Some firms with existing remuneration arrangements that meet the FCA’s expected outcomes are not expected to make significant changes.
Instead of relying on prescriptive rules, the FCA proposes adopting a more outcomes-focused approach, ensuring that firms are given greater flexibility to tailor remuneration arrangements to their governance, business model and risk profile. To support this approach, firms would be expected to maintain effective governance and the effectiveness of their remuneration arrangements.
The FCA proposes a risk-based approach, applying general remuneration requirements to all staff, with additional requirements for material risk takers (MRTs) such as the consideration of both financial and non-financial factors when undertaking assessments on performance.
The FCA proposes replacing prescriptive deferral requirements with a flexible principle-based approach while consulting on a potential threshold-based alternative. Firms would continue to use deferral and clawback arrangements where appropriate to support alignment between remuneration, long-term performance, risk and the interests of clients.
The FCA proposes removing the obligation for firms to maintain remuneration committees and conduct annual independent reviews, while still requiring them to ensure effective governance and oversight of remuneration arrangements.
The proposed changes would simplify reporting requirements by removing the MIF008 remuneration reporting template and reporting obligations for MIFIDPRU firms.
The proposals would adjust the scope of the firms that are subject to requirements. After the reforms to AIFMs have been implemented, only medium and large AIFMs will be in scope. For UCITS, the requirements will continue to apply. For MIFIDPRU firms, the scope of remuneration requirements will be narrowed. This will be achieved by excluding SNI firms, while continuing to apply the requirements to non-SNI firms. The existing tiered remuneration regime will be replaced with a consolidated framework.
The proposed reforms are intended to simplify the remuneration framework and reduce regulatory burden. These changes are expected to provide greater consistency and alignment across remuneration processes, ensuring that the rules are clearer and more proportionate to a firm’s size and risk.
Thistle Initiatives works alongside advice firms to help them respond confidently to regulatory expectations, whether they are growing, restructuring or refining their proposition. We can help you understand what the consultation and the proposed changes mean in practice and support the enhancement of a firm’s framework, ensuring consistent standards are applied throughout the business and market.
Get in touch at info@thistleinitiatives.co.uk or call 0207 436 0630 to speak with our team.
Sophia recently joined Thistle as a Consultant in the Investment Wholesale team. She holds a Bachelor of Science in Psychology from the University of Nottingham and brings a strong foundation in investment compliance. Before joining Thistle, she worked at a hedge fund where she supported regulatory development projects and contributed to policy reviews, giving her practical insight into how firms adapt to emerging requirements. She has also completed the CISI Introduction to Securities and Investment and Global Financial Compliance modules, which further strengthened her technical knowledge.