FCA remuneration reform explained: what CP26/27 could mean for firms

What happened?

The FCA has published Consultation Paper CP26/27, proposing to replace the existing AIFM, UCITS and MIFIDPRU remuneration codes with a single remuneration framework for in-scope solo-regulated firms. The proposed regime aims to simplify the current landscape, reduce duplication and create a more proportionate approach that reflects the size, activities and risk profile of firms.

While the proposals could reduce prescriptive requirements, the FCA has made clear that remuneration governance, accountability and risk management will remain important supervisory priorities. The consultation closes on 16 September 2026, with a policy statement expected in Q1 2027.

Why does it matter?

The consultation signals more than a technical consolidation of remuneration rules. It reflects the FCA’s broader shift towards outcomes-based regulation, where firms are expected to demonstrate that governance arrangements lead to appropriate behaviours, sound decision-making and good customer outcomes.

Although firms may gain greater flexibility under a simplified framework, they may also face increased expectations to evidence how remuneration supports appropriate conduct, effective risk management and organisational culture.

Who is affected?

The proposals are primarily relevant to solo-regulated firms currently subject to the AIFM, UCITS or MIFIDPRU remuneration regimes.

The impact will vary depending on a firm’s classification, whether it remains within scope under the new framework and how remuneration is managed across its wider group structure. Senior managers, governance committees, HR functions, compliance teams and SMCR accountable individuals may all have a role in assessing the implications.

Key risks

Assuming simplification means reduced regulatory scrutiny.
Treating the consultation proposals as final rules before publication of the FCA’s policy statement.
Being unable to evidence how remuneration supports customer interests and good outcomes.
Weak governance oversight of incentives, conduct risks and non-financial performance measures.
Misalignment between remuneration practices, organisational culture and Consumer Duty objectives.
Overlooking interactions between remuneration governance and SMCR responsibilities.

Actions to take

Determine whether the proposed framework applies to your firm or group structure.
Review current remuneration policies, controls and governance arrangements.
Identify areas of unnecessary complexity within existing remuneration frameworks.
Assess how remuneration supports conduct, culture, risk management and customer outcomes.
Evaluate how remuneration governance aligns with Consumer Duty and wider regulatory expectations.
Monitor consultation developments ahead of the FCA’s final policy statement.

Wider implications

CP26/27 reinforces a growing regulatory theme across the FCA’s supervisory work. Whether considering Consumer Duty, governance reviews or outcomes monitoring, the regulator is increasingly focused on evidence of effectiveness rather than adherence to detailed processes alone.

For firms, this suggests that governance frameworks will continue to be judged not only on their design but also on their ability to demonstrate positive outcomes, effective challenge and sound decision-making.

Recommendations

Firms should avoid wholesale implementation while the proposals remain under consultation. Instead, this is an opportunity to assess the strength of existing governance arrangements and the quality of evidence available to support remuneration decisions.

Senior management should be able to explain:

How remuneration arrangements support customer interests.
How conduct risks are reflected in reward decisions.
How non-financial performance measures influence remuneration outcomes.
How inappropriate incentives are identified and challenged.
How remuneration supports the firm’s culture and Consumer Duty objectives.

Supporting sources

Consultation Paper CP26/27

Frequently asked questions

Which firms are affected by FCA’s CP26/27?

FCA’s CP26/27 is relevant to solo-regulated firms currently within the AIFM, UCITS or MIFIDPRU remuneration regimes. The precise effect will depend on a firm’s existing classification, whether it remains in scope under the proposals and, where relevant, its group structure.

Is the FCA’s CP26/27 removing remuneration requirements?

No. The FCA’s CP26/27 is proposing a simpler and more proportionate framework, but remuneration governance, accountability and alignment with appropriate outcomes will remain important regulatory expectations.

FCA’s CP26/27, what is the expected timetable?

The FCA’s CP26/27 consultation closes on 16 September 2026. The FCA currently expects to publish a policy statement in Q1 2027.

What does FCA CP26/27 tell us about the FCA’s wider supervisory approach?

The wider regulatory message on the back of the FCA’s CP26/27 remuneration proposals is that outcomes, governance and accountability remain central to the FCA’s supervisory approach. Across the Consumer Duty, governance and outcomes monitoring reviews, firms are increasingly expected to evidence how decisions, controls and governance arrangements lead to good customer outcomes.

What remuneration codes would CP26/27 replace?

The FCA proposes replacing the AIFM, UCITS and MIFIDPRU remuneration codes with a single remuneration framework (CP26/27) for firms remaining in scope.

What should firms do before the FCA finalises the remuneration rules?

Firms can assess whether the proposals apply to their business, review existing remuneration governance arrangements, identify unnecessary complexity and monitor developments ahead of the FCA’s policy statement. As CP26/27 remains a consultation, firms should avoid treating the proposals as final requirements.