On June 29, the FCA published their policy statement PS23.7 in response to feedback to their consultation paper on broadening of retail and pension scheme distribution of the Long-Term Asset Fund (LTAF).

The statement finalises rules for retail access to the LTAF confirming the recategorization from a Non-Mass Market Investment (NMMI) to an RMMI. This entails requirements of risk warnings and summaries for firms marketing LTAFs to retail investors. As a result, LTAF distribution has been extended to mass market retail investors, self-select DC pension schemes, and Self-Invested Personal Pensions (SIPPs).

Several changes have been implemented following the consultation, with key changes including:

• The risk warning / summary text has been amended to focus on liquidity over investment risk.

• Fund-of-funds exposure limits have been raised permitting Non-UCITS Retail Scheme Fund of Alternative Investment Funds (NURS FAIF) to invest up to 35% of its scheme property in a single LTAF. NURS FAIF can invest more than 50% of its scheme property in LTAFs if it operates limited redemption arrangements to manage liquidity.

• Third party valuation rules have been modified in line with valuation requirement for NURS.
• Retail investor protection rules have additional requirements for retail investors including engagement with unitholders about significant fund changes, arrangements for unitholder meetings and the register of unitholders, investor updates, and restrictions on payment types and charges.

Several changes have been made concerning pension distribution requirements including:

• Non-advised investors can now access long-term unit-linked products, including non-workplace schemes and non-qualifying workplace schemes.
• The restriction of 35% on illiquid assets in unit-linked fund structures within the default arrangement of a qualifying scheme has been removed.
• Consumers holding LTAFs in self-selected pensions or SIPPs will receive a notification informing them about the illiquid nature of their holdings as they near retirement age.

The new rules and guidance will come into force July 3 2023. A transitional period for authorised fund managers (AFMs) to implement changes extends until July 3 2024.