A performance improvement plan in UK financial services: SMCR and your reference

Why the standard playbook breaks here

A performance improvement plan in a regulated role is negotiated differently from one anywhere else, and the reference is why. Almost everywhere else, an agreed neutral reference is cheap employer currency: the ask that costs them nothing and protects your next job. In roles covered by the Senior Managers and Certification Regime it largely stops working, and negotiating as though it still applies leads somewhere unpleasant.

If you hold a Senior Management Function or a Certification Function, this page matters more than the general UK one — though read that too, because the ACAS process baseline still applies.

Regulatory references are mandatory and backward-looking

A firm hiring into a Senior Management Function, a Certification Function or a non-approved non-executive role must obtain references covering the candidate's previous six years — including from previous employers outside the UK and unregulated ones. Firms must supply them as soon as reasonably practicable, and that duty is not written to turn on how the employment ended — dismissal, resignation and redundancy alike. Since April 2026 the Handbook adds guidance that a firm should normally issue a reference within four weeks of a request, down from six: a shorter period, but an expectation rather than a rule.

Two consequences follow, and both cut against the usual advice:

• They cannot be contracted away. A settlement agreement cannot lawfully require a firm to suppress information it is regulatorily obliged to disclose, and firms must update references already given if further information later comes to light. The clean-slate exit that works in technology does not exist here.
• Leaving mid-investigation does not close it. Regulatory policy expects firms to consider recording that an internal misconduct investigation was begun but not concluded because the individual left. Resigning to avoid a process can follow you into the reference.

Performance can escalate into fitness and propriety

Fitness and propriety assessment covers honesty and integrity, financial soundness, and competence and capability.

For certified staff that last limb is the one to watch. A sustained competence finding is categorically more serious than an ordinary performance plan, because it touches whether you can hold the function at all rather than whether you keep this job.

Distinguishing "this role, this manager" from "a competence finding on the record" is the single most important early question in a regulated-role plan. It is worth asking in writing: which SMCR category does my role fall in, does this process touch fitness and propriety, and will anything be recorded in a regulatory reference.

The record also follows you into the FCA Directory, which firms must update for leavers within seven business days.

Classification is worth more than money

Whether an exit is papered as performance management, as redundancy, or as anything touching conduct or competence has consequences that outlast the severance by years.

So negotiate the characterisation first, and what the firm will and will not say in a regulatory reference. That outranks squeezing the last increment of cash — which is the opposite of the ordinary advice, and the reason this page exists.

Ask for the reference wording that is permissible, not for silence: what the firm intends to record, whether any investigation is open or will be noted, and whether the fitness and propriety assessment is affected. Get it in writing.

Deferred compensation is the finance-specific money question

Bad-leaver and forfeiture provisions in deferred awards, and malus and clawback terms, typically dwarf statutory entitlements in these roles. They are governed by the plan documents, not by employment law.

Read the plan rules before choosing any door. Structure varies by firm and this is not something to generalise from anybody else's experience.

Law-firm implementation guidance confirms that firms treat negotiated and bad-leaver exits as a regulatory workstream. The other side is approaching this as a regulatory question, and so should you.

Reform status, checked September 2026

The regime is mid-reform, and the first phase landed on schedule.

• 24 April 2026. Criminal-record checks: validity extended from three to six months, and no check needed for internal or intragroup moves. The twelve-week rule changed so that firms have twelve weeks to submit a senior-manager application rather than to submit and receive approval, with the candidate able to act in role until determination. Statements of Responsibilities and Management Responsibilities Maps: up to six months to notify changes.
• 10 July 2026. Improvements to regulatory reporting and processes.
• 30 July 2026. The Directory drops multiple overlapping certification functions for one individual.
• 1 September 2026, now in force. The non-financial-misconduct rules: bullying, harassment and violence against colleagues come inside the conduct rules where they relate to the role, with guidance on how they bear on fitness and propriety — relevant if your process has a conduct dimension, and aimed, in the regulator's own words, at getting such misconduct into references.

What the reform did to references, read in September 2026. An earlier version of this page said the reference regime had been edited by the April 2026 reforms and might have been narrowed. The policy statement itself says otherwise. The change is the response time — the FCA now expects a reference within four weeks of a request rather than six, as guidance — plus new guidance on what to include when someone leaves before an investigation into suspected misconduct has concluded, which points toward disclosure rather than away from it. The six-year lookback, the duty to give a reference at all, and the duty to update one already given are unchanged. Everything above stands, and the direction of travel is more disclosure, not less.

The clearest case in this guide for specialist advice

Fairhanded is not a law firm. This is the clearest case in this guide for taking specialist advice early: the interaction between a performance process, fitness and propriety, and deferred compensation is not something to work out from a website. Find a solicitor who does financial services employment work specifically.

What to have with you at the first meeting is the preparation half, and it is worth more than the hour you are paying for.