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Introduction
Over the past year, the Financial Conduct Authority (FCA) has been overhauling its approach to product disclosure for retail investment products, specifically Packaged Retail and Insurance-based Investment Products (PRIIPs), so as to address longstanding issues with the current regime. The existing PRIIPs framework, inherited from EU law, has been widely criticized for being overly prescriptive, inflexible, and not fit for the UK market.
The FCA and the UK Government are replacing it with a new, domestically tailored regime for Consumer Composite Investments (CCIs) that aims to deliver clearer, more useful, and more engaging information to consumers, while giving firms greater flexibility to innovate.
The changes are largely aimed at simplifying the current disclosures as they lack clarity, and there is substantial evidence indicating that their limited accessibility is discouraging retail audiences from engaging with the materials.
Strategic framework changes in the CCI Regime
1. Shift from prescriptive to outcomes-focused regulation
The FCA is moving away from rigid, template-driven disclosure requirements (like the PRIIPs KID and UCITS KIID) to a more flexible, outcomes-focused strategy.
The new framework prioritizes good consumer outcomes, empowering consumers to make effective, timely, and well-informed decisions. Firms are encouraged to use their judgement and innovate in how they communicate product information, rather than simply following prescribed formats.
2. Alignment with the Consumer Duty
The CCI regime is closely aligned with the FCA’s Consumer Duty, which requires firms to act to deliver good outcomes for customers.
Communications must support and enable consumers to make effective, timely, and properly informed decisions. Greater responsibility is placed on firms to consider the needs, characteristics, and objectives of their customers, including those with vulnerabilities.
3. Proportionate and technology-neutral approach
The framework is designed to be proportionate, reducing unnecessary prescription and allowing for flexibility based on the nature of the product and the needs of the consumer. It is technology-neutral, encouraging the use of digital tools, layering, dashboards, and interactive features to make disclosures more engaging and accessible.
4. Standardization only where essential
Standardization is required only where it is essential for consumer understanding and comparability, specifically for costs, risk, and performance metrics. This enables consumers to compare products effectively, while allowing firms flexibility in other areas to tailor communications.
5. Enhanced role for distributors
Distributors can adapt or supplement the manufacturer’s information to better meet the needs of their customer base, provided they do not distort or obscure the core information.
6. Early and ongoing disclosure
Product information must be provided early in the consumer journey, not just at the point of sale, and must be kept up to date.
Firms must review and update product information at least annually, and flag any material changes to distributors and consumers.
7. Focus on consumer engagement and behavioral insights
The FCA recognizes that consumers are subject to behavioral biases (e.g., anchoring, information overload) and aims to mitigate these by making key information prominent and accessible.
Firms are encouraged to use plain language, images, and digital features to support better consumer engagement and understanding.
8. International competitiveness and growth
The new regime is designed to make the UK a more attractive place for firms and investors by reducing unnecessary prescription, supporting innovation, and ensuring proportionate regulation.
The FCA will monitor international trends and the impact of the new regime on the competitiveness and growth of UK capital markets.
Details on the changes
| UK PRIIPS KID | Overview of changes |
Document & format | Key information Document (KID) in a standalone document with specified format/template - maximum three sides of A4. | Firms have the freedom to design product information, removing format and template requirements. |
Cost information | Any direct and indirect costs associated with an investment in the PRIIP, including one-off costs, recurring costs and incidental costs. A reduction in yield table showing the total impact of costs over time. Presented over three different holding periods as a single number in both percentage and monetary terms. | Performance fees and carried interest explained using narrative and examples. Changing reduction in yield to summary costs over a 12-month period. |
Risk information | 1-7 risk metric based on credit and market risk, defined by the Cornish Fischer expansion. Risk information that is separated from information on performance. | 1-10 risk metric based on product volatility. Flexibility to change risk indicator based on key risks or product features such as capital guarantee. Combined risk-reward information to help consumers understand the features of products. |
Performance information | Descriptions of the factors that are likely to affect the performance of a product both positively and negatively, and the impact they may have on its returns. | A past performance graph covering a 10-year period (where data is available), to visually help the consumer’s understanding and to provide more contextual information. |
Transaction costs | Both implicit and explicit costs taken into account. | Remove the requirement for firms to calculate and disclose implicit transaction costs as part of their CCI cost disclosures. This will mean there is no need for firms to use the slippage methodology. This simplification would remove a compliance requirement for firms, while ensuring that consumers are still provided with the most relevant information about the transaction costs of their chosen product. |
How can EY help you?
Affected firms will need to review and revise their product information documents to comply with the new framework.
Our teams are ready to assist you with:
- A gap analysis between your current disclosure and our proposed solution
- Adaptations to the standardized solution to better aid your investors to understand your funds
- Ensuring that your business will already be well positioned to comply with the implementation well ahead of the transition deadlines in mid-2027
Summary
Over the past year, the Financial Conduct Authority (FCA) has been overhauling its approach to product disclosure for retail investment products, specifically Packaged Retail and Insurance-based Investment Products (PRIIPs), so as to address longstanding issues with the current regime. The existing PRIIPs framework, inherited from EU law, has been widely criticized for being overly prescriptive, inflexible, and not fit for the UK market.
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