Money Covered: The Week That Was – 15 May 2026

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The first episode of Season 5 of our podcast, Money Covered – The Month That Was, was released this week. David Allinson and Mel Redding discuss the FCA’s proposed section 404 consumer redress scheme for vehicle finance.

To listen to this and all previous episodes, please click here. 

Headline development 

The King's Speech

The King's Speech on Wednesday provided important elucidation of the Government's approach to key areas for Financial Lines.  We will be keeping a close eye on the proposed reforms, but we have summarised the relevant key elements of the King's Speech below.  

Financial services

The Enhancing Financial Services Bill seeks to modernise the regulation of the sector while aiming to support the UK's position as a leading global financial centre. Aside from reforms to the Financial Ombudsman and broader FCA changes, the Bill enables credit unions to expand by updating the rules on member eligibility, and supports lending and investment through updating the statutory framework underpinning the ring-fencing regime in order to unlock more finance for UK businesses.

Financial Ombudsman reforms
 
It is anticipated that once we have the detail of the Enhancing Financial Services Bill it will include a package of reforms intended to stop the FOS from acting as a 'quasi regulator' and returning it to its original role, being that of a simple, impartial dispute resolution service. The proposals from the treasury to date aim to ensure that the Financial Ombudsman can resolve complaints more quickly and informally, leading to faster and more consistent resolutions, reduced delays, and improved outcomes for all parties. The proposals also help encourage earlier proactive resolution of issues by firms. The key aims were also covered in an FCA publication and in a government press release. Key proposals are likely to include:

• Adaptation of the FOS' 'fair and reasonable' test. This is to be retained but, in circumstances where a firm complied with the FCA's rules, FOS will be required to determine that the firm acted fairly and reasonably. This may add a greater degree of certainty for financial services firms. However, this ties in with a requirement that the FOS makes references to the FCA for determination where there is ambiguity about the application of FCA rules. In our experience, the FCA tends to take a fairly consumer friendly interpretation.
• A proposal to introduce an 'absolute' limit of 10 years from the conduct complained of, to bring complaints to the FOS. This is a welcome proposal, as it has long been a criticism that FOS complaints were not subject to a 'longstop' in the same was as a civil claim.  However, carve outs are anticipated.
• The introduction of a new registration stage to ensure that complaints referred to the Financial Ombudsman are within its scope and ready to be investigated before being allocated to a caseworker. This comes alongside new powers to dismiss complaints that are best resolved via alternative means, are more appropriate for the courts or another dispute resolution process, or where there has been no material financial loss, distress or inconvenience.
• Currently the FOS cannot consider a complaint from a consumer about an appointed representative's (AR) conduct, to the extent its principal firm is not responsible for that conduct.  This has left some consumers unable to access the FOS to resolve disputes, in circumstances where they may have anticipated that the FOS would be able to assist them. Proposed changes seek to ensure that the FOS will have jurisdiction to consider complaints relating to regulated activities, regardless of whether they are carried on by an authorised firm or an AR. In circumstances where FOS determines that the principal is not responsible for its AR's acts or omissions, it will be able to consider the complaint directly against the AR.

Broader FCA changes
 
There are also changes proposed for the FCA within the Enhancing Financial Services Bill. Highlights include:

• Confirmation that the government will proceed with merging the Payment Services Regulator into the FCA, creating a more unified regulatory framework for payments. This reflects the view that a single regulator can deliver more coherent oversight to what is currently seen as a fragmented and duplicative system.
• An overhaul of the Senior Managers and Certification Regime (SMCR), potentially scrapping the certification regime that requires firms to check annually if senior staff are "fit and proper," which has long been seen as unnecessarily complex by parts of the industry.

Management Liability / D&O

• The Small Business Protections (Late Payments) Bill addresses the issues SMEs face with regards to delayed payments by imposing a maximum payment term of 60 days (with limited exceptions), mandatory interest of 8% above the BoE base rate for late payments, and the introduction of a time limit for raising invoice disputes.  This may result in fee claims between entities and in turn may lead to more litigation in supply chains.
• The Regulating for Growth Bill seeks to reduce the burden of unnecessary regulation in order to ensure that the UK's regulatory system is agile and responsive to innovation, ensuring that it plays a full role in delivering growth. The twin drivers of this are elevating the consideration of the 'Grow Duty,' a statutory mandate to prioritise growth within decision-making, and the creation of 'sandboxing powers' which would allow businesses to test and then scale up delivery of cutting-edge products and technologies.  This may increase risks around AI-washing.

Please click here for the full text of the speech.

Tax practitioners

HMRC publishes technical note on IHT and pensions

HMRC has published a policy paper providing further detail on how inheritance tax will apply to pensions from next April.

The update explains what will be required of personal representatives, who are often family members or friends of the deceased. 

In the technical note, HMRC confirms that:

• Personal representatives should take reasonable steps to identify pension schemes from which death benefits may be payable.
• In practice, this may involve checking the deceased’s papers, records and bank accounts, and speaking to known relatives, beneficiaries, advisers and business partners.
• Pension schemes and insurance companies will need to be contacted to inform them of the death and request information.
• Once pension schemes have been identified, providers will supply valuations and information about who is due benefits.
• Personal representatives will be required to calculate what, if any, inheritance tax is owed, using a new HMRC tool.
• Death-in-service benefits will not be included in the inheritance tax calculation.
• Pension payments to a spouse or UK resident civil partner are not covered by the IHT changes.
• Where at least 10% of a person’s net estate is left to a UK charity, the IHT rate is 36%, rather than 40%; and
• HMRC has also outlined how property held in pensions should be valued for calculating any IHT due.

HMRC said pension schemes should begin encouraging members to keep up to date records, to ease the administrative burden on personal representatives.

The update indicates that the process may be difficult in practice, particularly where records are fragmented, historic workplace schemes are involved, there are multiple pension providers, or online records are not readily accessible.

To read more, please click here.

HMRC consults on extending the UTT regime

HMRC has launched a consultation looking to extend the scope of the Uncertain Tax Treatment (UTT) regime. 

The UTT regime was introduced in 2022, to allow businesses to bring legal interpretation uncertainty notifications relating to Corporation Tax, VAT and Income Tax (including PAYE) to HMRC. In notifying the issue to HMRC, subject to any other necessary triggers, value or exemptions, it allows for early discussions over interpretations and to avoid later non-compliance. The aim of the UTT regime is to encourage cooperation with HMRC and promote fairness and transparency whilst reducing the 'legal interpretation' portion of the tax gap (being £5.4 billion in 2023/2024). 

The consultation is focused on: 

1. Extending the UTT to include allowing individuals and trusts into the scheme.

2. Expanding the definition of UTT to include an additional trigger. This trigger will apply where there is more than one credible legal interpretation.

3. Bring additional taxes into the scope. These taxes are:

a.    Stamp Duty Land Tax (SDLT)
b.    National Insurance contributions (NICs)
c.    Construction Industry Scheme (CIS) obligations
d.    Inheritance Tax (IHT)
e.    Capital Gains Tax (CGT)

4. Retaining the current £5 million de minimis threshold; and

5. Introducing a single annual deadline for all UTT notifications. 

Extending the UTT will allow HMRC to have early visibility of interpretation risks and will hopefully result in consistency and standardisation of decision making. 

If the proposals are eventually implemented, many tax payers and their advisors will need to review how they identify, document and escalate potential uncertainties. Early engagement with HMRC is likely to remain a key risk-management tool. 

The consultation is open until 4 June 2026. 

To read more, please click here.

Pensions

One-third of pension schemes are 'highly likely' to use Virgin Media remedy

The Pension Schemes Act 2026 only received Royal Assent a few short weeks ago, but a survey by Sackers shows that one-third of pension schemes are 'highly likely' to make use of the legislative remedy in the Act for the ruling in the Virgin Media v NTL Pension Trustees case which has dominated headlines in the pension industry since 2024.

A further 37% of schemes polled said they believed it was possible they would make use of the legislative remedy and were investigating further.  Of those 'highly likely' to make use of the remedy, 5% said they intended to do so immediately, and 37% anticipated they would make use of it within the first year.  

Schemes intending to make use of the remedy will now need to ensure that they can meet the requirements set out in the Act, and scheme actuaries asked to provide retroactive actuarial confirmation may want to take legal advice to ensure that they follow all the required steps as well.  While the process set out in the legislation is clear, it is now vital that scheme and actuaries follow the process closely and ensure that documentation of the required steps is complete and thorough.  

To read more, click here.

Regulatory developments for FCA regulated entities 

FCA publishes update for firms and consumers on motor finance scheme challenges

On 8 May 2026, the FCA published a statement aimed at both firms and consumers regarding the legal challenges to the motor finance compensation scheme.  The FCA acknowledged that the legal challenges aren't likely to be heard until October 2026, with results in mid-November 2026.

The FCA said it does not know whether it will try to implement a revised scheme if the current one is ultimately quashed or whether they will simply press ahead with a 'no scheme' scenario.  No matter the outcome of the legal challenges, the FCA identified a number of preparatory actions firms should still be taking now:

• Identifying relevant complaints and agreements.
• Gathering the data needed to identify commission arrangements and disclosure practices, including where information is held by brokers.
• Working with claims companies to resolve instances where consumers are represented by more than one party.  
• Cooperating fully and promptly with the Financial Ombudsman Service on any existing complaints that have been referred to it.  

They further said that firms need to ensure they are ready for a possible 'no scheme' scenario and that they have the resources available to take a 'complaint-led and supervisory approach'.  Although the FCA encouraged firms to continue to prepare for various contingencies, they also confirmed that they will be pragmatic and will not require firms to adhere to certain communication timetables set out in the scheme for the time being.  

The statement encourages consumers to complain directly to lenders to ensure that, in any scenario, their claim does not fall through the cracks.  It further encouraged consumers to carefully consider using claims management companies for their motor finance complaints, noting that they will likely be charged a portion of their compensation for the claims management services.

To read the FCA's full statement, click here.

FOS considers the benefits and risks of AI assisted consumer submissions

In a blog for the Financial Ombudsman Service (FOS), Mark Harris (COO) says AI is already reshaping the complaints landscape. More consumers are using generative AI to draft complaints and correspondence. The FOS recognises that this can improve clarity and accessibility (including for vulnerable users), but can also produce overly long, unfocused narratives and “hallucinations” (e.g. fabricated laws or decisions) that slow case progression. 

The FOS is also seeing claims management companies and legal representatives using AI to generate extensive, error-prone submissions (sometimes 200+ pages), raising concerns where consumers are charged significant fees and risking client detriment – the FOS is sharing insights on this with the FCA and SRA. While complaints about firms’ own AI use remain low, adoption for triage, routing and sentiment analysis is growing, bringing risks around opacity, missed vulnerability and consumers’ ability to challenge outcomes. The FOS is said to be adopting AI with stronger governance, published principles and human decision-making retained. 

To read the full blog see here.

FCA publishes whistleblowing data for Q1 of 2026

On 8 May 2026, the FCA published its data on whistleblowing for the first quarter of 2026.

The FCA has reported that it received 355 new whistleblowing reports in this quarter. This was an increase on the number of reports in same period in 2025, as well as Q4 in 2025 - during both periods the FCA received 281 reports.

During Q1 of 2026, most allegations raised in whistleblowing reports related to the Consumer Duty (210 allegations). After that, the most common allegations related to "Leadership & senior manager: Behaviour, conduct & integrity" (173 allegations) and then "systems and controls" (113 allegations).

It said that most whistleblowing reports were received via the FCA's online reporting form. Of the whistleblowing reports made, 32% were made anonymously, with 68% of reports containing contact details for the whistleblower.

The FCA also stated that it closed 265 whistleblowing reports in Q1 of 2026, with the outcomes of these as follows:

• 9% - significant action taken to prevent harm.
• 30% - action taken to reduce harm.
• 51% - informed the FCA's work including harm prevention, but no direct action.
• 2% - not considered indicative of harm, but information recorded for future reference.
• 8% - categorised as "other".

To read more, please click here.

FCA fine advisor for providing pension transfer advice without the benefit of PI insurance

The FCA has taken enforcement action against Frank Breuer, a director of Bluesky Wealth Management, imposing a fine of £755,000 and a prohibition from working in UK financial services. 

The FCA discovered that Bluesky Wealth Management's professional indemnity (PI) insurance expired on 1 April 2019, however the firm and Mr Breuer continued to provide advice regarding defined benefit transfers after this date. In fining and imposing the restriction on Mr Breuer, the FCA cites the deliberate exposure of consumers due to in the firm not having having suitable PI insurance in place, despite previous warnings by FCA. 

In October 2019, Bluesky Wealth Management agreed a voluntary restriction with the FCA which meant that it could not diminish or dispose of assets without prior approval. Despite this restriction, Mr Breuer paid himself and his wife substantial dividends, totalling £457,500 as well as taking out a director's loan of £273,000. The FCA consider these payments were a direct detriment to customers and was a deliberate action by Mr Breuer to avoid paying compensation to consumers and rendered Mr Breuer unfit to work within financial services. 

To read more, please click here.

HM Treasury consultation response backs faster FCA and PRA approvals

HM Treasury’s May 2026 consultation response confirms plans to legislate for cross cutting reforms to the FCA/PRA framework to support growth and agility. It will shorten statutory determination deadlines for key applications. New firm authorisations and variations of permission are expected to take 4 months rather than 6 for complete applications and 10 months rather than 12 if incomplete). SMCR senior manager approval times are expected to take 2 months rather than 3. It will also shorten related deadlines, including for applications to change requirements imposed by regulators and financial promotion approvals. The FCA and PRA must publish long term strategies at least every five years and consider FSMA regulatory principles, Treasury remit letters and LRRA/Regulators’ Code in those strategies rather than in day to day decision making. Legislation will follow when parliamentary time allows.

See here for the full consultation response. 

Relevant case law updates

Refusal to mediate was not unreasonable conduct, High Court determines

In MJS Projects (March) Limited v RPS Consulting Services Limited, the High Court determined that a defendant's refusal to engage in mediation, was not a refusal to engage in ADR.

In response to the claimant's request to mediate, the defendant declined without first having some understanding of expert evidence. The judge said the defendant's approach could not be described as unreasonable, also noting that the defendant had proposed other forms of ADR throughout the litigation and in addition to that, offers of settlement were made.

Referring to the Court of Appeal's ruling in Halsey v Milton Keynes General NHS Trust, the judge said: "Mediation is not the only, nor the preferred, method for parties engaging in ADR." In light of the judge's dismissal of the claimant's claim, the defendants were awarded interim costs of more than £300,000.

This case serves as a helpful reminder that parties to a dispute are not required to accept all requests for ADR, and that they should consider whether any proposed form of ADR will be of any benefit.

To read more, please click here.

With thanks to this week's contributors:  Heather Buttifant, James Parsons, Brendan Marrinan, Ben Simmonds, Alison Thomas and Kerone Thomas

If you have any queries please do get in contact with a member of the team, or your usual RPC contact.